After a grueling five-day trial, a California judge, Jacqueline Scott Corley, has granted Microsoft permission to proceed with its acquisition of Activision Blizzard. Although the tech giant still faces an ongoing antitrust case brought by the Federal Trade Commission (FTC), Judge Corley decided against granting the regulator’s request for a preliminary injunction.
Judge Corley’s ruling appears to favor Microsoft’s commitments to maintaining Call of Duty on PlayStation and potentially expanding the game to the Nintendo Switch. Despite the FTC’s objections to Microsoft’s cloud agreements, the judge took them into account in her decision. The court also acknowledged the possibility of the Nintendo Switch being considered part of the console market, a point on which Microsoft and the FTC disagreed. However, Judge Corley concurred with the FTC that PCs should not be considered part of the console market.
In response to the court’s decision, Microsoft President Brad Smith expressed gratitude for the swift and thorough ruling and expressed hope for similar resolutions in other jurisdictions. Xbox head Phil Spencer, a key witness in the trial, also tweeted his reaction, emphasizing that the evidence presented demonstrated the benefits of the Activision Blizzard deal for the industry and dismissing the FTC’s claims about console switching, multi-game subscription services, and cloud as disconnected from the realities of the gaming market.
Activision Blizzard CEO Bobby Kotick welcomed the decision, stating that the merger would benefit consumers and workers and introduce healthy competition into the rapidly growing industry.
On the other hand, FTC spokesperson Douglas Farrar expressed disappointment with the outcome and hinted at the commission’s plans to continue its fight to protect competition and consumers. The FTC is currently contemplating its next steps in response to the ruling.
The Acquisition Deadline
The court’s decision allows Microsoft to proceed with the Activision Blizzard acquisition before the July 18th deadline, but only if the company closes the deal outside the UK or negotiates a remedy with the Competition and Markets Authority (CMA). Microsoft has been appealing the CMA’s decision to block the acquisition, and a hearing is scheduled for July 28th.
Recent reports suggest that Microsoft has been exploring alternative strategies to finalize the deal despite the UK block, which may have contributed to the FTC’s initial request for an injunction. The CMA had also sought to delay Microsoft’s appeal of its Activision Blizzard acquisition, but the request was denied by the Competition Appeal Tribunal (CAT) as it would have significantly prolonged the process.
Addressing CMA’s Concerns
Following Judge Corley’s decision, Microsoft and the CMA have agreed to pause their legal battle in the UK to explore potential modifications to address the CMA’s concerns regarding cloud gaming. The agreement still requires approval from the CAT, but all parties involved seem inclined to find a resolution in the UK.
While European regulators have already approved the acquisition in May, Microsoft’s ability to proceed without the UK and without a US injunction adds complexity to the situation. Both Microsoft and the CMA are eager to avoid such a scenario.
The FTC now has the opportunity to appeal Judge Corley’s decision by July 14th, 11:59 PM PT. However, given the regulator’s lack of appeal in the Meta-Within acquisition case, it is possible that the FTC may abandon its case against Microsoft and Activision Blizzard.
If the court order remains unchanged, this will mark the second major setback for FTC Chair Lina Khan in her pursuit of Big Tech companies since assuming her position in 2021.