US judge temporarily blocks Microsoft’s Activision purchase as deadline approaches

Xbox Activision Blizzard Header

A US judge has put a temporary block on Microsoft’s $68.7 billion acquisition of Activision Blizzard after the FTC requested a preliminary injunction so that their complaint can make its way through the courts. The problem for Microsoft is that there’s an 18th July completion deadline or they face a $3 billion breakup fee as a penalty.

The FTC’s complaint argues that without a block, Microsoft and Activision could close the deal pretty much whenever they wanted, and that the injunction was needed “to maintain the status quo while the complaint is pending”. The court has agreed with this, imposing a block until “after 11:59 p.m. Pacific Time on the fifth business day after the Court rules on the FTC’s request for a preliminary injunction” or on another date that is set by the court.

The first evidentiary hearing on the preliminary injunction is set for next week on 22nd and 23rd June, so Microsoft and Activision almost certainly won’t be closing the transaction this month. They seem pretty sanguine about this, with Microsoft spokesperson David Cuddy said in a statement to The Verge that “A temporary restraining order makes sense until we can receive a decision from the Court, which is moving swiftly.”

The deal is supposed to close before an 18th July deadline, after which it expires and Microsoft is forced to pay Activision Blizzard $3 billion in a breakup fee. There’s a possibility that they can renegotiate to extend that deadline, given the regulatory headwinds they’re facing, but if not, Microsoft would then have to make a new offer for the company.

Completing before that 18th July deadline would also fly in the face of the UK regulator, the Consumer and Markets Authority, blocking the deal in April. Microsoft has appealed that decision and the hearing for that in set for the week of 24th July. The company has apparently brought on a bunch more lawyers for this, potentially looking at ways to work around the UK’s sole complaint around cloud gaming, though they will argue in the courts that the CMA completely ballsed up their investigation and came to stupid conclusions. By contrast, the EU Commission approved the acquisition after noting Microsoft’s proactive signing of deals with rival game streaming platforms and that game streaming doesn’t actually replace home console and PC gaming, but supplements it.

UPDATE: Microsoft have admitted that the block would ruin the Activision deal and have requested the FTC give them five days, not two, to defend themselves and try and stop in the injunction.

Source: US DC Northern District of California via The Verge

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