By Gary Symons
TLL Editor in Chief
A court in California has denied the Federal Trade Commission’s request for an injunction on Microsoft’s acquisition of Activision.
The software giant announced on Jan. 18 this year that the parties had agreed to the terms of a deal. It would see Microsoft acquiring Activision Blizzard for $95 per share, in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard’s net cash.
When or if the transaction closes, Microsoft would become the world’s third-largest gaming company by revenue, behind Tencent and Sony. The planned acquisition includes top tier franchises from the Activision, Blizzard and King studios like “Warcraft,” “Diablo,” “Overwatch,” “Call of Duty” and “Candy Crush,” in addition to global eSports activities through Major League Gaming. The company has studios around the world with nearly 10,000 employees.
However, the deal has faced opposition from regulators around the world, particularly in the US, the EU and the UK. In fact, the wannabe partners announced they planned to pull many of Activision’s business activities out of the UK, citing an anti-business environment.
In the US, however, the companies scored a legal victory as Judge Jacqueline Scott Corley ruled she would deny the injunction and allow Microsoft to close its acquisition of Activision Blizzard after a five day hearing. Microsoft still faces an ongoing antitrust case by the Federal Trade Commission.
In her ruling, Corley said commitments made by Microsoft to keep the massive hit game Call of Duty on Sony’s Playstation platform for the next 10 years and to bring CoD to Nintendo’s Switch platform was enough to assuage her concerns over the potential for too much power being placed in the hands of Microsoft.
“Microsoft’s acquisition of Activision has been described as the largest in tech history,” said Corley. “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.
“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.”
Activision Blizzard CEO Bobby Kotick also made a statement, saying, “Our merger will benefit consumers and workers. It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry.”
The FTC, on the other hand, said it’s not happy with the decision, and will be announcing further measures as it feels the merger would hurt consumers. “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 spokesperson Douglas Farrar. “In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers,” said Farrar.
While the battle may not be over, the judge’s ruling in this case was considered critical due to a looming deadline to complete the deal. Microsoft was given until July 18 to close the deal with Activision, and an injunction would have put the sale into an extremely awkward position. As it is, the parties still have to deal around the UK’s opposition to the merger, as the British Competition and Markets Authority (CMA) ruled in April that it will block the acquisition. Microsoft is appealing that decision in a hearing on July 28, but with the deadline coming up in just a week, the companies may have to simply move existing operations out of the UK and essentially complete the deal while remaining outside the UK’s sphere of influence.
However, within minutes of Judge Corley’s decision, the CMA and Microsoft have agreed to pause their legal battle, and try to negotiate how the Activision Blizzard deal could be modified to address the CMA’s concerns over Microsoft’s dominance in the cloud gaming space.
As European regulators agreed—after some changes—to approve the deal back in May, Microsoft could actually close the deal without the UK and the US agreement, but it would seriously hamper the merged companies operations. For that reason, analysts in the gaming industry consider it possible Microsoft will agree to further concessions in order to close the deal in all three jurisdictions.
Epic Games and Microsoft Strike Blow Against Apple and Google