Microsoft can close its Activision merger, federal judge rules

In a significant legal development, a federal judge at the US District Court for the Northern District of California has declined to grant an injunction sought by US regulators to block Microsoft’s $69 billion acquisition of Activision Blizzard, a major video game company. This ruling allows Microsoft to proceed with the deal, which will position the company as the third-largest video game publisher globally, granting it control over highly popular franchises like “Call of Duty,” “World of Warcraft,” and “Diablo.”

District Judge Jacqueline Scott Corley stated that the US government had not provided sufficient evidence to support its claims that the merged entity would likely withdraw “Call of Duty” from Sony PlayStation or diminish competition in the video game library subscription and cloud gaming markets. The decision clears the path for Microsoft to finalize the acquisition, potentially within days.

The Federal Trade Commission (FTC) had argued that an injunction was necessary to protect consumers, as ongoing litigation surrounding the merger could cause immediate harm to video gamers. The FTC had expressed concerns that Microsoft’s ownership of Activision could result in the withholding of popular titles from competitors like Sony and emerging cloud-based streaming platforms. However, Microsoft executives, including CEO Satya Nadella, testified during the hearing that they had no intention of restricting access to franchises such as “Call of Duty.” To address regulatory scrutiny, Microsoft also signed licensing agreements with companies like Nvidia and Nintendo to ensure continued availability of content on their platforms.

This court ruling is a significant victory for Microsoft, as a successful injunction would have potentially derailed the entire acquisition. The decision favored Microsoft’s arguments, highlighting that the FTC failed to prove the company’s incentive to keep “Call of Duty” exclusive to its platforms. It emphasized that Microsoft’s commitment to making the franchise available on multiple platforms was backed by its licensing agreements. The ruling also indicated that the public scrutiny of the deal had influenced Microsoft’s behavior and reduced the need for court intervention.

Following the ruling, Microsoft expressed gratitude for the court’s decision and hoped for timely resolutions in other jurisdictions. The company’s success in federal court may prompt the FTC to reconsider its opposition to the deal. However, the FTC has expressed disappointment and may explore further options, potentially appealing the decision to the US Court of Appeals for the Ninth Circuit.

Separately, Microsoft has also reached an agreement with UK antitrust officials to suspend litigation related to the merger in the UK. Both parties will work toward addressing competition concerns raised in the country through potential modifications to the transaction.

Overall, this legal victory paves the way for Microsoft to solidify its position as a major player in the video game industry, while the FTC and other regulators may continue their efforts to protect competition and consumers.