A federal judge sided with Microsoft on Tuesday in a setback for the U.S. Federal Trade Commission’s attempt to block the tech giant’s $68.7 billion acquisition of video-game publisher Activision Blizzard.
“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,” wrote U.S. District Judge Jacqueline Scott Corley in the ruling.
The ruling, denying the FTC’s motion for a preliminary injunction, leaves no doubt as to where the judge stands on the key issues in the case.
“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 case has been closely watched as a test of the FTC’s ability to rein in big tech companies under the leadership of Chair Lina Khan.
“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” said FTC spokesman Douglas Farrar in a statement. “In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”
The decision comes a week before a contractual July 18 deadline to complete the deal.
Brad Smith, Microsoft president and vice chair, said the company is grateful to the court “for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution. He added, “As we’ve demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory concerns.”
Microsoft still faces a challenge from the UK’s Competition and Markets Authority (CMA).
In a follow-up statement, Smith said Microsoft still disagrees with the CMA’s position on the case but is now “considering how the transaction might be modified” to address the UK regulator’s concerns. Microsoft, Activision, and the CMA have asked the UK’s Competition Appeal Tribunal for a stay in their litigation while they negotiate.
The CMA’s April decision focused heavily on the cloud gaming market.
“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,” the CMA said in a news release at the time. “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.”
