US Judge Hands Microsoft Massive Win, Blocking FTC's Attempt to Halt Activision Deal, But the FTC May File an Appeal Wednesday

A federal judge has given Microsoft a landmark victory by striking down the US Federal Trade Comission’s attempt to block its planned $69 billion acquisition of Activision Blizzard.

However, the FTC is considering an appeal of the court’s decision today.

Microsoft Gains Huge Advantage

Microsoft has taken a significant step forward in its $69 billion acquisition of Activision Blizzard, as a US federal judge rejected the Federal Trade Commission’s attempt to block the deal.

Judge Jacqueline Scott Corley, who initially granted the FTC a temporary restraining order against the merger last month, denied their request for a more serious preliminary injunction.

Corley criticized the FTC, stating they had not demonstrated that a vertical merger in a specific industry would significantly reduce competition.

However, Microsoft’s victory in court was not unexpected, given the strong defense presented by their attorneys during the five-day trial in San Francisco late last month.

Testimony was given by Satya Nadella, the CEO of Microsoft, and Bobby Kotick, the longstanding CEO of Activision Blizzard, during the proceedings.

Both executives vowed to maintain access to Activision’s Call of Duty, one of the most popular and profitable game franchises in the world, for gamers to compete with Microsoft’s Xbox, particularly Sony’s PlayStation.

Following the judge’s ruling on Tuesday, Kotick noted in a written statement what consumers and employees would benefit from the merger.

He added that the decision would encourage competition rather than allow established market leaders to maintain dominance over the fast-paced industry.

Microsoft’s victory is a heavy blow to FTC’s increased scrutiny of the technology sector under Chairperson Lina Khan.

President Joe Biden appointed Khan in 2021 due to her strong opposition to what she perceives as monopolistic conduct exhibited by tech giants like Amazon, Google, and Meta.

FTC to Push Back Against Judgement

While the recent judgment may have been a setback to the FTC, the regulatory body does not plan to take the judge’s ruling.

According to a source familiar with the matter, the FTC is contemplating appealing the federal judge’s decision.

Although a final decision has not been made, the appeal may be filed as soon as Wednesday, according to the individual who asked to remain anonymous.

However, a temporary restraining order was ordered on the deal. This delays Microsoft’s transaction completion until Friday at midnight US West Coast time.

Judge Corley noted that the FTC would have to ask the 9th Circuit Court of Appeals for an emergency stay to prolong that moratorium past Friday.

On the other hand, industry expert Professor Robert Lande of the University of Baltimore School of Law did not support the judgment.

He claimed that Corley was unreasonable in the degree of assurance she demanded from the FTC’s argument.

According to Robert, to comply with the law, the agency simply needs to demonstrate that a merger “may” significantly diminish competition, not that it “will” or “is likely to.”

In the past, the FTC discontinued cases after failing to get an injunction, as deals are often more difficult to contest after they have been closed.

CMA Opened to Discussion

The recent ruling by the judge allows Microsoft and Activision to proceed with their transaction in the US before the July 18th deadline set at the time of the announcement.

However, in the UK, where the Competition and Markets Authority (CMA) blocked the merger in April due to concerns about hindering cloud gaming expansion, the two companies still have to overcome a challenge.

In a noteworthy shift from its previous stance, the CMA responded to the US court’s decision on July 11th.

The regulatory body expressed willingness to review and potentially accept any suggestions from Microsoft to modify the transaction to address their concerns.

Microsoft President Brad Smith stated that their attention has shifted to the UK following Tuesday’s court verdict in the U.S.

He added that they are investigating how the transaction might be changed to meet those issues in a way acceptable to the CMA, even if they ultimately disagree with the CMA’s concerns.

According to Tom Smith, a competition attorney at Geradin Partners, the UK veto prevents Microsoft and Activision from finalizing their merger.

Smith, a former CMA legal director, noted that if Microsoft closed the transaction now, it would be a breach of the CMA’s Interim Order.

This could leave Microsoft open to a large fine of up to 5% of the combined global group revenues of the two parties.

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