Preliminary Injunction Denied - Microsoft Beats FTC in Court & Ready to Close Activision Merger
11.07.2023 um 12:28
Four weeks after filing an expedited preliminary injunction against the $68.7 billion merger between Microsoft and Activision Blizzard, the U.S. Federal Trade Commission has lost its case in court. Throughout the five-day hearing, which saw testimony from the FTC, Microsoft, Sony, and several industry experts, the FTC failed to convince the court that the merger would substantially lessen competition or that the newly combined company were likely to pull blockbuster franchises like Call of Duty from the Sony PlayStation platform, thereby resulting in the preliminary injunction against the deal being denied.
The full 53 page
public version of the document
can be viewed here.
The Court's Ruling
Throughout the hearing, the FTC took on a number of arguments, ranging from competition of cloud services, to whether or not the Nintendo Switch could be considered a competitive part of the console market, though the biggest argument throughout focused on the fear that the newly bolstered Microsoft would pull major Activision franchises like Call of Duty from the PlayStation platform - an argument that
everyone involved vehemently denied
. District Judge Jacqueline Scott Corley remained unconvinced on all fronts, noting Microsoft's pledge to bring the games to additional platforms and ruling that in contrast to the FTC's claims, the merger was likely to provide even more access to Activision games rather than lessen it.
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.
Comments from Activision, Microsoft, and the FTC
Following the news, Activision Blizzard CEO Bobby Kotick sent an email celebrating the decision to employees earlier today.
Today a U.S. federal judge ruled in our favor, denying the Federal Trade Commission’s attempt to block our merger with Microsoft.
We’re grateful to the court for the way this process was handled and the thoughtfulness of the decision. The U.S. joins the 38 countries where our deal can proceed—these decisions are based on facts and data that show our merger is good for players and for competition in the industry.
We’re optimistic that today’s ruling signals a path to full regulatory approval elsewhere around the globe, and we stand ready to work with UK regulators to address any remaining concerns so our merger can quickly close.
We’ll continue to keep you updated on our progress. Thank you for all you do for our players, for our company, and for each other.
Likewise, Microsoft President Brad Smith and Head of Xbox Phil Spencer shared their own congratulatory comments over Twitter, while
The Verge shared a more detailed internal email
to Microsoft employees from Spencer.
On the other side, the FTC lamented the decision against them, with
spokesperson Douglas Farrar saying
“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.”
What Comes Next
Although this decision does not mean that the deal is completely "approved," it is a significant victory for Microsoft, allowing them to close the Activision merger. The FTC may continue their administrative action against the merger and even appeal the judge's decision against this injunction, but in the meantime, Microsoft is allowed to proceed - closing the deal and merging the two companies once the temporary restraining order ends on July 14th.
That said, Microsoft continues to face another hurdle in the United Kingdom's Competition and Markets Authority, which also
ruled against the deal last April
. Looking forward to another court hearing against the UK regulator on July 28th, Microsoft has already been purportedly exploring options to close despite the CMA's disapproval, potentially even removing Activision products and services from the U.K. in the process, though that "nuclear option" may have been put on hold.
Following Judge Corley's decision, Microsoft President Brad Smith revealed that Microsoft and the CMA have agreed to delay their court battle, seeking out suitable remedies to appease regulatory concerns on their own.
The future remains uncertain, as there are still a number of judicial options remaining to the FTC and some concessions may be needed to assuage the CMA, but it is appearing increasingly likely that the merger between Microsoft and Activision Blizzard will proceed as planned.
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