The Federal Trade Commission (FTC) has decided to pause its administrative trial regarding Microsoft’s pending acquisition of Activision Blizzard. This move comes as the agency and the companies involved enter settlement talks for the $68.7 billion merger. The FTC initially filed a lawsuit in December to block the deal, and an evidentiary hearing was scheduled for August 2nd. However, last week, the agency lost a legal bid to prevent the merger from proceeding before the trial. In response, the FTC has appealed its court loss.
This latest development is a significant victory for Microsoft and Activision as they seek to finalize the merger. In a ruling last week, Judge Jacqueline Scott Corley stated that the FTC had not demonstrated that the deal would remove Call of Duty from Sony PlayStation or harm competition in the video game subscription and cloud gaming markets. Microsoft has further solidified its commitment to keeping Call of Duty on PlayStation for the next decade by signing a deal with Sony should the merger proceed.
In a motion filed on Tuesday, Microsoft and Activision urged the FTC to withdraw its case. According to FTC rules, the agency is obligated to withdraw its case once the companies request it, as they were denied a preliminary injunction to halt the merger. This withdrawal opens the door for Microsoft and Activision to propose solutions that address the agency’s concerns about competition in the gaming industry. Alternatively, they could convince the FTC to abandon its opposition to the merger entirely.
If the merger closes, the FTC still has the option to proceed with its administrative trial. However, it is uncommon for the agency to pursue an in-house case after losing a federal court battle.
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Initially, the deadline for the merger’s completion was Tuesday, but Microsoft and Activision have extended their agreement until October 18th to allow time for resolution of remaining regulatory concerns. If the deal falls apart, Microsoft will be responsible for a breakup fee of up to $4.5 billion, but both parties are determined to proceed with the merger.
Before the merger can be finalized, Microsoft and Activision must obtain approval from a UK regulator. The Competition and Markets Authority (CMA) initially blocked the merger in April due to concerns about its impact on the cloud gaming market. However, recent signals from the CMA indicate a willingness to reach an amicable resolution. Microsoft is preparing an updated merger proposal for submission to the CMA, and a decision is expected by August 29th.
During a hearing this week, a lawyer representing the CMA stated that both the regulator and Microsoft are confident that the company will be able to address the CMA’s concerns. This development further supports the likelihood of the merger being completed in the coming weeks.
In conclusion, the FTC’s decision to pause its administrative trial and engage in settlement talks is a significant win for Microsoft and Activision. The companies now have an opportunity to address the agency’s concerns and potentially secure approval for the merger. Additionally, the extension of the merger agreement and the positive indications from the UK regulator suggest that the deal is moving closer to completion. If successful, this merger will mark a historic moment in the gaming industry.
