US approves Microsoft's Activision Blizzard deal (Update: FTC appeals ruling)

Update, July 12, 2023 (8:00 PM ET): The FTC has filed a notice that it will appeal Tuesday’s ruling that cleared the way for Microsoft’s acquisition of Activision Blizzard. The regulator will need the Ninth Circuit Court of Appeals to issue an emergency stay to extend the existing temporary restraining order preventing Microsoft from closing the deal, which is set to expire at 11:59 PM PT on July 14th. The CMA also released a statement on Wednesday warning that any restructuring to Microsoft’s deal could lead to a new merger investigation, and talks between it and Microsoft are still in the early stages.

Original, July 11, 2023 (1:51 PM ET): After a week of testimony, Microsoft just got its biggest win of the year. Judge Jacqueline Scott Corley has sided with the tech giant and is allowing Microsoft to close its acquisition of Activision Blizzard.

According to Tom Warren of The Verge, Judge Corley has submitted her ruling today. The judge has reportedly denied the Federal Trade Commission’s (FTC) request for a preliminary injunction. In her decision, Judge Corley states:

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.

In summary, the judge sided with Microsoft keeping Call of Duty on PlayStation for 10 years with parity to the Xbox. One of Sony’s complaints was that Microsoft could prioritize the Xbox version of the game. The decision also acknowledges Microsoft’s cloud gaming and Nintendo Switch agreements.

Before the FTC’s request for a preliminary injunction, Microsoft was reportedly looking into ways to close its deal despite being blocked by the UK’s Competition and Markets Authority (CMA). This move by Microsoft seems to be what prompted the FTC to file its injunction in the first place.

In response to today’s ruling, the head of Xbox, Phil Spencer, said the company was “grateful to the court for swiftly deciding in our favor.”

This ruling now gives the Redmond-based firm the go-ahead to close its acquisition deal with Activision Blizzard before the July 18 deadline. But to do so, this would’ve required the company to close around the UK since the CMA blocked the acquisition. However, only minutes after the decision, it was revealed by Microsoft President Brad Smith that the company and the CMA had reached an agreement to pause litigation and modify the deal to address the CMA’s concerns over cloud gaming.

The FTC will have a chance to appeal the judge’s ruling by 11:59 PM PT on July 14. Whether the regulator does or doesn’t, we’ll have to wait and see.

Although Call of Duty exclusivity was the main point of focus in this case, it’s believed Microsoft has bigger plans with this $68.7 billion deal. Back in October, the tech giant revealed in documents given to the CMA that it had plans to build a mobile game store to rival the App Store and Play Store. Microsoft even created a chart to emphasize the mobile market’s importance. With apps like Call of Duty Mobile, Candy Crush, and more, Microsoft’s app store would have the firepower to challenge Apple and Google.