FTC Appeals Court Ruling Doesn’t Guarantee Switch Call Of Duty

Update: The conflict over Microsoft’s acquisition of Activision Blizzard isn’t over yet. A California judge ruled in favor of Microsoft and denied the FTC’s request for a preliminary injunction against the deal earlier this week. The FTC appealed.

The Verge’s senior editor @tomwarren reported that the regulator’s argument behind the appeal has not been shared yet and will likely remain that way until it is submitted to the Ninth Circuit Court of Appeals, which may issue “an emergency stay to extend the existing temporary restraining order” on July 14.

BREAKING: the FTC has filed an appeal against Judge Corley's decision to deny its preliminary injunction request over Microsoft's proposed Activision Blizzard acquisition https://t.co/jvtufsEaed

— Tom Warren (@tomwarren) July 12, 2023

Microsoft president Brad Smith tweeted that “the FTC is continuing to pursue what has become a demonstrably weak case”:

Yesterday the Court ruled our acquisition of Activision Blizzard should proceed, and we oppose any further delay. Our statement on the FTC's decision to appeal: pic.twitter.com/EhdO4OHX9g

— Brad Smith (@BradSmi) July 13, 2023

Microsoft may be able to complete the acquisition early next week if the appeal is passed before the deal deadline of 18 July. Activision-Blizzard was removed from the Nasdaq-100 ESG Index before market open on July 17 by Nasdaq. Microsoft looks ready.

This may increase pressure on Microsoft to settle with the UK’s Competition and Markets Authority, which is still defying the deal.

Original article: A California judge denied the Federal Trade Commission’s preliminary injunction against Microsoft’s acquisition of Activision Blizzard after five days of evidence. The US deal can proceed.

Today’s result means Microsoft can start the takeover in the US and fulfill its legally-binding promise to bring Call of Duty to Nintendo consoles. The deal is still blocked in the UK.

Judge Corley sided with Microsoft on all claims, including “an agreement with Nintendo to bring Call of Duty to Switch,” in a 53-page document filed today. Part of this conclusion follows:

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.

Microsoft president Brad Smith thanked the court on Twitter:

After the court hearing, Microsoft has until 18 July to close the Activision deal, but the UK deal is still blocked until Microsoft can appeal the Competition and Markets Authority’s decision on 28 July.

After the US and EU approved the deal, either the UK will close the deal or the CMA will negotiate. The CMA hearing may delay the 18th July deadline.

Smith tweeted another CMA statement. Microsoft disagrees with the CMA, but it is “considering how the transaction might be modified in order to address those concerns”:

Our statement on the mutual request with the CMA for a pause of our appeal in the UK: pic.twitter.com/8Aky2IJjxS

— Brad Smith (@BradSmi) July 11, 2023

Microsoft’s chances are improving, but it’s not a done deal yet.