Microsoft's $75B deal to buy Activision can go forward: judge

Tech

By Ariel Zilber

A federal judge on Tuesday gave Microsoft the green light to complete its $75 billion acquisition of gaming giant Activision Blizzard – dealing a blow to Federal Trade Commission chief Lina Khan’s bid to scupper the merger.

US Judge Jacquelin Scott Corley of the Northern District of California ruled the FTC failed to prove that the gaming industry’s largest merger in history would harm competition.

The court separately extended its temporary restraining order to Friday at 11:59 pm to allow the Federal Trade Commission to appeal.

The decision marked a significant setback for Khan, who had argued the merger would give Microsoft, maker of the Xbox gaming console, exclusive access to Activision games including the best-selling “Call of Duty.”

Corley, who was appointed by President Biden, cited Microsoft’s pledge to keep “Call of Duty” available on rival consoles like Sony PlayStation and Nintendo’s Switch for her ruling.

“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,” Corley wrote in her decision.

“To the contrary, the record evidence points to more consumer access to ‘Call of Duty’ and other Activision content.”

Less than an hour after Corley’s ruling, Britain’s antitrust authority, which had blocked the deal in May, said it was putting its decision on hold so as to allow Microsoft to “restructure” the merger.

“We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns,” a spokesperson for the UK Competition and Markets Authority said.

Microsoft and Activision cannot complete the merger until they are given the final go-ahead from the CMA.

“We’re grateful to the court in San Francisco for this quick and thorough decision,” Microsoft President Brad Smith said.

“Our focus now turns back to the UK. While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA.”

Activision Blizzard CEO Bobby Kotick told staffers in an email on Tuesday that the gaming giant was “optimistic that today’s ruling signals a path to full regulatory approval elsewhere around the globe.”

An FTC spokesperson said the agency was planning its next move.

“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” FTC spokesperson Douglas Farrar said.

“In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”

Microsoft shares edged higher and Activision shares jumped 10%.

Kotick stands to pocket a handsome sum of money if the deal with Microsoft is consummated.

The embattled 59-year-old CEO, whose handling of sexual harassment and discrimination claims at the company prompted criticism of his management style, stands to gain $390 million by dint of the 3.95 million shares of Activision that he owns.

Kotick plans to step down once the deal with Microsoft closes.

Kotick, who has led Activision since 1991 and turned it into one of the world’s biggest videogame giants, said last year that the company had “worked through” allegations of sexual harassment and discrimination that led to more than 20 employees being fired and 20 more individuals facing other forms of disciplinary action last year.

During the five-day trial in June, Microsoft CEO Satya Nadella argued the company would have no incentive to shut out Sony’s PlayStation or other rivals in order to sell more Microsoft Xbox consoles. At issue in the Microsoft-Activision deal is leadership in a gaming market whose sales are expected to increase by 36% over the next four years to $321 billion, according to a PwC estimate.

And while much of the testimony in the recent trial focused on “Call of Duty,” Activision produces other bestsellers like “World of Warcraft,” “Diablo” and the mobile game “Candy Crush Saga.” Microsoft’s bid to acquire the videogame maker also faces opposition from Britain’s Competition and Markets Authority, which blocked the takeover in April. An appeal is scheduled for July 28.