Microsoft wins its Activision-Blizzard case against the FTC but may face a new UK investigation

Update 07/13: The FTC has filed an official appeal against the ruling. It will now be necessary for the court to extend its temporary restraining order, which is set to expire on July 14, in order to prevent the two companies from closing the deal.

After the Federal Trade Commission (FTC) announced its attempt to temporarily block Microsoft from purchasing publisher Activision-Blizzard, the Xbox parent emerged victorious in court against the US-based regulator, leaving the UK market as its only obstacle.

The details:

• After five days of testimony in California, the court sided with Microsoft (via The Verge) to deny the FTC's request for an injunction that would have allowed the regulatory body to "investigate" Activision-Blizzard's $69 billion acquisition before it was completed. This decision now allows Microsoft to close the deal before the July 18 deadline, which if missed would require the company to pay a fee to the publisher.
• The FTC has since stated that it is "disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles," but that it will reveal its "next step to continue our fight to preserve competition and protect consumers" in the coming days. The regulator attempted to persuade the court that the deal could have caused serious problems for Sony, with Microsoft having the ability to pull Call of Duty, a significant revenue generator for PlayStation, from the platform. Still, it failed to provide evidence of any such intent. "There are no internal documents, emails, or chats contradicting Microsoft's stated intent not to make Call of Duty exclusive to Xbox consoles," the judge’s ruling states. "Despite the completion of extensive discovery in the FTC administrative proceeding, including production of nearly 1m documents and 30 depositions, the FTC has not identified a single document which contradicts Microsoft's publicly-stated commitment to make Call of Duty available on PlayStation (and Nintendo Switch).”
• Following the decision, Microsoft president Brad Smith issued a statement on Twitter saying that he is “grateful to the Court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution.” Xbox head Phil Spencer also expressed his thoughts in a tweet, saying, “We’re grateful to the court for swiftly deciding in our favor. The evidence showed the Activision Blizzard deal is good for the industry and the FTC’s claims about console switching, multi-game subscription services, and cloud don’t reflect the realities of the gaming market.”
• Activision Blizzard CEO Bobby Kotick has also issued a public statement about the situation (via Reuters). “Our merger will benefit consumers and workers,” said Kotick “It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry.”

What’s next?

• Despite the victory in the United States, the acquisition of Activision is still being blocked in the United Kingdom by the Competition and Markets Authority (CMA), which claims that the deal would significantly harm competition in the cloud gaming space. Microsoft not only stated that it would appeal the ruling but it was also reported that the company may have planned to avoid it entirely by moving its operations out of the country. However, immediately following the US ruling, both the CMA and Microsoft agreed to put their legal battle on hold, with both parties attempting to find a middle ground with changes to the deal to address cloud gaming concerns.
• The CMA also issued a statement to The Verge, stating that restructuring the deal could result in an entirely new merger investigation, which could result in the acquisition being blocked once more. “Whilst merging parties don’t have the opportunity to put forward new remedies once a final report has been issued, they can choose to restructure a deal, which can lead to a new merger investigation. Microsoft and Activision have indicated that they are considering how the transaction might be modified, and the CMA is prepared to engage with them on this basis.” the regulator said. “These discussions remain at an early stage and the nature and timing of next steps will be determined in due course. While both parties have requested a pause in Microsoft’s appeal to allow these discussions to take place, the CMA decision set out in its final report still stands.”