Microsoft wins FTC court case to buy Activision Blizzard, UK CMA halts appeal

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The Microsoft acquisition of Activision Blizzard looks like it’s going ahead, as the courts have denied the US Federal Trade Commission’s request for a preliminary injunction. In light of the US ruling, the UK’s Conumser and Markets Authority has agreed to halt their upcoming legal spat and head back to the negotiating table.

As you would expect, Activision Blizzard stocks have shot up 11% as the markets show more confidence in Microsoft completing the deal within the next few weeks – they have a contractual deadline on 18th July to do so.

After a five day long court battle that had Microsoft saying they’d lost the console wars, revealing that more Bethesda games would be Xbox exclusives (and their execs blindsided by the Call of Duty cross-platform pledge), and failed redactions from Sony’s submitted documentation, and plenty more besides, Judge Jacqueline Scott Corley has landed firmly on Microsoft’s side in the argument.

The FTC was not able to convince her that Microsoft buying Activision would be anti-competitive, and noted that regulator scrutiny had paid off in forcing them to make COD cross-platform with full parity, and sign partnerships with cloud gaming platforms.

Judge Corley said the following in the ruling:

Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. 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. This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted—perhaps even terminated—pending resolution of the FTC administrative action. For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED.

The FTC hasn’t quite given up yet – spokesperson Douglas Farrar said “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.”

Yet it’s pretty much inarguable to see that they flubbed their arguments, failing to convince Judge Corley on their narrowed definition of the gaming market – they didn’t want to include cloud gaming or the Nintendo Switch in their definition.

This has had an immediate ripple effect over in the UK, as Microsoft has agreed with the CMA to pause their legal proceedings and look for an alternative solution. The Consumer and Markets Authority, blocking the deal in April, with the appeal set to head to the courts in the week of 24th July.

Probably recognising that they had a losing hand, the CMA said to Engadget that it was “ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our Final Report.”

What further remedies Microsoft will offer isn’t clear, especially given that their appeal would have largely hinged upon their opinion that the CMA had wildly overestimated the importance of cloud gaming and Microsoft’s effective market share in that arena.

Source: The Verge, Engadget, Seeking Alpha

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