US Judge Rules Microsoft Deal to Buy Activision Can Go Forward

The logo for Microsoft, and a scene from Activision "Call of Duty—Modern Warfare," in New York, on June 21, 2023. (AP Photo/Richard Drew)

A U.S. judge ruled on Tuesday that Microsoft can proceed with its planned acquisition of videogame maker Activision Blizzard for $69 billion after the European Union (EU) approved the deal between the two gaming companies.

Britain’s Competition and Markets Authority (CMA) objected to the deal in April, arguing that it hurts consumers and that it was prepared to consider Microsoft’s proposals to resolve antitrust concerns in the United Kingdom.

The deal would be the largest for Microsoft and the biggest in the history of the videogame business. Activision shares were up 11.3 percent at $92.01, and Microsoft shares were flat.

The entrance to the Activision Blizzard Inc. campus is shown in Irvine, Calif., on Aug. 6, 2019. (Mike Blake/Reuters)

The Federal Trade Commission (FTC) had asked U.S. district judge Jacqueline Scott Corley in San Francisco to stop the proposed deal, arguing it would give Microsoft exclusive access to Activision games, including the best-selling “Call of Duty.” The agency’s concern was that the deal would potentially preclude the availability of those videogames on other platforms.

The federal government “has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets,” Judge Scott Corley wrote in the 53-page partially redacted opinion.

Corley’s decision is another setback in the Biden administration’s efforts to increase antitrust enforcement efforts.

The U.S. court in San Francisco gave the FTC until Friday to appeal the judge’s decision.

FTC spokesperson Douglas Farrar said the antitrust regulator was “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 announce our next step to continue our fight to preserve competition and protect consumers.”

Microsoft president Brad Smith said that the company was “grateful” for the “quick and thorough” decision.

“We’re grateful to the court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution,” Mr. Smith said in a statement Tuesday. “As we’ve demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory concerns.”

He also tweeted that his focus would now be on Britain. “While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified  to address those concerns in a way acceptable to the CMA.”

The decision comes weeks after the United Kingdom’s merger regulator stunned the gaming industry by vetoing the deal. The EU’s analysis indicated that the acquisition would not harm competition, especially as Microsoft has committed to allow cloud rivals to offer popular games like “Call of Duty” on their platforms for the next decade.

Activision Blizzard CEO Bobby Kotick said the merger “will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry.”

Microsoft’s victory in federal court could potentially lead the FTC to drop its in-house merger challenge and abandon its opposition to the Microsoft deal overall. In a similar situation in February, the FTC dropped its in-house case against Meta’s proposed acquisition of Within Unlimited, a virtual reality startup, after a different judge in the same court also declined to grant a preliminary injunction.

“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” Douglas Farrar, a spokesperson for the FTC, said in a statement on Tuesday. “In the coming days, we’ll announce our next step to continue our fight to preserve competition and protect consumers.”

Microsoft announced a deal with UK antitrust officials to suspend litigation over the merger while both sides try to agree on how the acquisition might be altered to address competition concerns in that country.

“We are considering how the transaction might be modified to address those concerns in a way acceptable to the [Competition and Markets Authority],” Smith said in a statement. “Microsoft and Activision have agreed with the CMA that a stay of the litigation in the UK would be in the public interest, and the parties have made a joint submission … to this effect.”