After a lengthy legal battle, a court gave Microsoft the green light to finalize its acquisition of video game developer Activision Blizzard for $69 billion—potentially the largest deal in tech sector history.
Regulators from the Federal Trade Commission (“FTC”) attempted to bring the deal to a halt last week, expressing concerns about unfair consolidation and anticompetitive business dealings. The FTC cited “Call of Duty,” one of Activision Blizzard’s best-selling franchises, as its primary example. The popular first-person shooter game is currently available across multiple platforms but the series becoming a Microsoft-owned Xbox exclusive posed a red flag for the FTC. The FTC alleged this level of exclusivity could harm consumers.
If Activision Blizzard’s other franchises — “World of Warcraft,” “Overwatch,” and “Diablo,” to name a few — received similar exclusivity, the gaming landscape would be shaken up significantly.
The hearing featured testimony from executives of both Microsoft and Activision Blizzard squaring off against FTC regulators. Testimony was also heard from Jim Ryan, CEO of Sony Interactive Entertainment. Naturally, the man behind PlayStation, Microsoft’s biggest rival in the infamous Console Wars, was one of the most vocal critics of the deal.
According to the defense, an injunction against the takeover agreement — established nearly 18 months ago — would effectively force the two companies to abandon the deal altogether. Microsoft would then be obligated to pay Activision a $3 billion breakup fee once the July 18th deadline passed.
Additionally, Microsoft and Activision entered into a court agreement to maintain “Call of Duty” as a cross-platform title for at least 10 years, further pledging to make the series available on Nintendo Switch and Nvidia’s forthcoming cloud gaming service.
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United States District Judge Jacqueline Scott Corley ruled in Microsoft’s favor, approving the deal after determining that the FTC’s injunction would likely not hold up in trial. Judge Corley noted: “[the U.S. 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.”
“Our merger will benefit consumers and workers,” Activision Blizzard CEO Bobby Kotick said in a written statement after Tuesday’s ruling. “It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry.”
At this time, it is unclear whether the FTC will attempt to appeal the decision and reinstate the injunction. Further complicating the situation is the case’s presence at the forefront of Biden’s campaign against tech monopolies. Biden-appointed FTC Chairperson Lina Khan instituted higher levels of scrutiny against multiple tech giants, including Meta, Amazon, and Facebook. But following the ruling from Judge Corley, herself a Biden appointee, the effectiveness of the entire campaign may be called into question.
In the meantime, despite this substantial legal victory, Microsoft and Activision Blizzard still have other obstacles to overcome. While many countries and the European Union approved the merger, challenges remain from regulatory bodies in the United Kingdom and Canada, though these subsequent hearings may be put on hold following the FTC’s defeat.
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