Earlier this week, Microsoft came up trumps in the Activision Blizzard case when the US federal court sided in the tech giant’s favor. Judge Jacqueline Scott Corley denied a preliminary injunction request by the Federal Trade Commission (FTC). As per the court ruling, one of the major points was that FTC could not prove that the deal was anti-competitive.
But the FTC is not ready to let this one slide so easily from its grasp yet.
Continuing The Battle
The latest news on the block is that FTC has appealed the court order that smoothened the way for Microsoft’s Activision Blizzard acquisition, as per a report by The Verge. There is still some time before we know the full import of the arguments, as we could know that only when the full appeal gets submitted.
With this appeal, FTC would want the Ninth Circuit Court of Appeals to extend the temporary restraining order (TRO) on the deal. The TRO, if not extended, will expire on July 14, 11:59 PM PT.
With the appeal, FTC would want to prevent the Activision-Xbox merger before the trial takes place in August. If nothing stands in its way, the acquisition would complete on July 18. If the FTC has its way this time and the deal does not go through by July 18, then Xbox would have to pay $3 billion to Activision Blizzard.
Microsoft vs. FTC: What the Judge Said in the Ruling
Earlier, Judge Corley said in the ruling that the court’s responsibility in the case is “narrow”. The judge said: “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.”
What if the Judge Had Ruled in FTC’s Favor?
If the court had initially ruled in favor of the FTC, then the Microsoft-Activision deal would have been blocked temporarily. Microsoft would have a chance to move forward with the deal only after facing FTC’s own case against it, which it anyway has to when the case commences on August 2.
What Microsoft Has to Say
In a statement given to The Verge, Microsoft president Brad Smith said: “The District Court’s ruling makes crystal clear that this acquisition is good for both competition and consumers. We’re disappointed that the FTC is continuing to pursue what has become a demonstrably weak case, and we will oppose further efforts to delay the ability to move forward.”
Our Take
If this merger does indeed happen, then Microsoft would leapfrog various competitors to become the third-largest video game publisher in the world. At the moment, the top spots are occupied by Tencent and Sony. Since Microsoft hasn’t had the best track record in terms of video game licenses, this deal would help the company immensely. However, policymakers are worried that the merger could also enable Microsoft to use various franchises, such as Call of Duty and Overwatch, as a bargaining chip for exclusivity, both on consoles and cloud gaming services. At the moment, most of the repercussions are conjecture, as this deal will take some time to be completed.
