After more than six months of battling the Federal Trade Commission, Microsoft cleared a critical regulatory hurdle in their proposed $68.7 billion all-cash acquisition of video game developer Activision Blizzard. Yesterday, a federal judge denied the FTC’s request for a preliminary injunction designed to halt the merger, reports GeekWire. The court’s order also formally dismissed the case effective on July 14, 2023 at 11:59 p.m., unless the FTC obtains a stay pending appeal from the Ninth Circuit Court of Appeals.

“After considering the parties’ voluminous pre-and-post hearing writing submissions, and having held a five-day evidentiary hearing, the Court DENIES the motion for preliminary injunction,” wrote U.S. District Judge Jacqueline Scott Corley in her redacted ruling dated July 10. “The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets.”

The judge noted in her 53-page decision that Microsoft’s proposed acquisition of Activision Blizzard is the largest in tech history and deserves to be reviewed and thoroughly examined.

“That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services,” Judge Corley said.

FTC spokesperson Douglas Farrar shared the FTC’s thoughts on the denial in a statement.

“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles. In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers,” Farrar said.

Meanwhile, Phil Spencer, head of Microsoft’s Xbox division, shared the company’s gratitude on Twitter.

UK rejects Activision Blizzard deal, EU approves it

This news follows mixed reviews by regulatory authorities across the pond. In April, after an in-depth review, the UK’s Competition and Markets Authority denied Microsoft’s proposed acquisition of Activision Blizzard on the grounds that the merger could stifle competition in the cloud gaming market.

“The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future,” the CMA wrote.

“The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities,” added the CMA.

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In May, however, the European Commission approved the merger after an extensive market investigation, stating that the deal wouldn’t harm rival consoles or rival multi-game subscription services. In contrast, the Commission also said there is potential for harming the competition in the distribution of games through cloud streaming services and that the deal would strengthen Microsoft’s market position for PC operating systems.

Ultimately, the Commission approved the deal with the caveat that Microsoft must be in full compliance with the commitments Microsoft has made to mitigate the Commission’s concerns. The Commission said those commitments “represent a significant improvement for cloud gaming.”

Margrethe Vestager, executive vice president in charge of competition policy, commented on the reason for the Commission’s decision.

“Video games attract billions of users all over the world. In such a fast-growing and dynamic industry, it is crucial to protect competition and innovation. Our decision represents an important step in this direction, by bringing Activision’s popular games to many more devices and consumers than before, thanks to cloud game streaming. The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, enhancing competition and opportunities for growth,” Vestager said.

Insider Take

So, what’s next? After much anticipation, Microsoft and Activision Blizzard are ready to seal the deal. They will need to wait until the July 14, 11:59 p.m., deadline to do so, however. If the FTC has not filed an appeal by that time, the tech giant and video game developer can ink the multi-billion-dollar deal that has tapped significant regulatory resources for review for at least the last six months. Based on the European Commission’s and the US federal court’s ruling in favor of Microsoft, the FTC may decide to cut their losses and take their ball and go home to focus on other high-profile antitrust cases.

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