The Federal Trade Commission (FTC) has announced that it is appealing a recent US federal court order that cleared the way for Microsoft to acquire Activision Blizzard. The appeal has been filed with the Ninth Circuit Court of Appeals, but the full arguments from the FTC will not be known until the appeal is submitted. The court order in question was issued by Judge Jacqueline Scott Corley, who denied the FTC’s request for a preliminary injunction against the merger.
In her ruling, Judge Corley stated that the FTC had failed to demonstrate that the merger would result in a substantial lessening of competition in the specific industry. She also noted that there was evidence suggesting that the merger would actually increase consumer access to Activision content, such as the popular game “Call of Duty.” If the preliminary injunction had been granted, it would have temporarily halted the merger until the conclusion of the FTC’s administrative case against Microsoft, which is set to commence on August 2nd.
However, with the FTC’s decision to appeal the court order, they are now seeking an emergency stay from the Ninth Circuit Court of Appeals. The stay would extend the existing temporary restraining order, which is set to expire on July 14th. It remains uncertain if the appeals court will rule before the merger deadline of July 18th, potentially allowing Microsoft to close the deal without any restraining order in place.
In addition to the FTC’s legal challenge, Microsoft still needs to address concerns raised by the UK’s Competition and Markets Authority (CMA) before the merger can proceed. The CMA previously blocked the deal on grounds of cloud gaming concerns. However, following Judge Corley’s ruling, both Microsoft and the CMA agreed to pause their legal battles and engage in negotiations.
Surprisingly, the CMA issued a statement warning that if Microsoft proceeded with restructuring the deal, it could lead to a new merger investigation. The discussions between Microsoft and the CMA are still in the early stages, and it remains unclear what changes may be required to address the CMA’s concerns regarding cloud gaming.
Contrary to a report from CNBC, which suggested that Microsoft and the CMA had agreed on a “small divestiture” to address cloud gaming concerns, the CMA statement indicates that discussions are ongoing and no agreement has been reached yet.
On a positive note, Microsoft’s deal with the European Union (EU) includes a remedy that grants consumers in EU countries a free license to stream Activision Blizzard games via any cloud gaming service of their choosing. This remedy also extends to cloud providers, who will be offered a free license to stream these games.
As the FTC appeals Judge Corley’s decision and negotiates with the CMA, all attention now turns to the Ninth Circuit Court of Appeals and the potential resolution of Microsoft’s issues with the UK regulator. The outcome of these legal battles will significantly impact the future of the Microsoft-Activision Blizzard merger and the gaming industry as a whole.
