Microsoft wins U.S. court case over Activision Blizzard acquisition

The company still has to get the deal approved in the U.K., though

A California judge has ruled in favour of Microsoft in the company’s battle with the U.S.’ Federal Trade Commission (FTC) to acquire Activision Blizzard.

In a five-day hearing last month, the FTC pushed for a preliminary injunction, which Judge Jacqueline Scott Corley has since denied. In her ruling, Corley argued that the FTC had failed to make a case for how Microsoft’s acquisition of Activision Blizzard would stifle competition.

“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.

Corley is referring to agreements Microsoft has signed with the likes of Nintendo and Nvidia to bring Call of Duty games to other platforms for 10 years should the purchase be approved. Sony, for its part, has been trying to block the deal by arguing that Call of Duty is a massive part of the PlayStation ecosystem and, therefore, Microsoft should not be permitted to own it. Microsoft has offered a similar 10-year deal to Sony, but PlayStation boss Jim Ryan admitted that it wasn’t satisfactory and continued to push to block the deal.

Corley continued:

“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.”

While the FTC will continue to build an antitrust case against Microsoft, Corley’s ruling does clear the buyout, for now, in the U.S. It’s a major victory for Microsoft as it fast approaches the July 18th deadline to complete the acquisition or pay Activision Blizzard a $3 billion USD (about $4 billion CAD) breakup fee.

That said, it’s expected that Microsoft and Activision Blizzard will renegotiate to extend the deal, given that it still requires approval in the U.K. In April, British regulators blocked the deal, arguing, among other points, that Microsoft owning Activision Blizzard would be anti-competitive in the nascent cloud gaming market.

Following the California ruling, Microsoft and the U.K.’s Competition and Markets Authority (CMA) have agreed to pause their legal battle to further negotiate. Microsoft was set to appeal the CMA’s decision in a hearing scheduled for July 28th. Now, Microsoft says it will work with the CMA to better address its cloud gaming concerns.

However, the CMA told The Verge that any restructured deal between Microsoft and Activision Blizzard may be subject to “a new merger investigation.” For now, though, the regulator notes that “discussions remain at an early stage and the nature and timing of next steps will be determined in due course.”

The European Union approved the deal in May.

Update 1 — 11/07/2023 at 12pm ET: Added information on Microsoft’s new agreement to negotiate with the U.K.

Update 2 — 12/07/2023 at 11:09am ET: Added information on what the CMA may do next following the new agreement.

Source: United States District Court of California