In an unexpected twist. A US federal court has declined the FTC’s request to halt Microsofts $69 billion acquisition of Activision Blizzard. This court ruling follows a previous favorable ruling in Microsofts’ favor by a federal judge. The FTCs appeal and subsequent denial by the court only serve to complicate matters further for this significant business transaction.
In a surprising turn of events, a US federal court has dismissed the Federal Trade Commission’s (FTC’s) plea to halt Microsoft‘s whopping $69-billion acquisition of the renowned “Call of Duty” creator, Activision Blizzard.
The court filing unveiled the rejection of the FTC’s request, which sought to temporarily delay the closure of the deal. Just a few days ago, a federal judge had already ruled in favor of Microsoft, stating that the agency failed to demonstrate any illegality under antitrust laws. Seizing the opportunity, the FTC promptly filed an appeal, to which Microsoft declared its intent to fiercely contest.
In a further twist, the FTC appealed for an order that would prevent the deal from finalizing until the 9th US Circuit Court of Appeals ruled on a separate stay request lodged with them.
The existence of this regulatory hurdle increases the likelihood that Microsoft and Activision’s agreement might expire on July 18th, resulting in the deal being left incomplete. Unless an extension is negotiated, either party would be at liberty to walk away following this date.
The FTC pressed the court to expedite a decision on the temporary hold, emphasizing that an existing temporary restraining order on the deal was scheduled to expire just before midnight on Friday. Expressing their disappointment, Microsoft’s President, Brad Smith, conveyed their commitment to contest any further attempts to delay progress, regarding the FTC’s case as weak.
In their motion for a pause, submitted to Judge Jacqueline Scott Corley, the FTC contended that her denial of a preliminary injunction to impede the deal “raises serious, substantial issues for the Court of Appeals to resolve.” In response, the judge issued an order late on Thursday denying the FTC’s request, stating, “The motion is denied.”
The FTC originally sought a preliminary injunction to temporarily halt the deal until an internal FTC judge could assess it. However, Corley applied the standard necessary to permanently stop the deal, a move the agency deemed inappropriate. Additionally, the FTC claimed that the judge had erred in evaluating the deal’s impact on multi-game subscriptions and in the weight she assigned to Microsoft’s efforts in securing agreements with competitors to salvage the proposed transaction.
To address the FTC’s concerns, Microsoft had agreed to grant licenses for “Call of Duty” to rivals, even securing a 10-year contract with Nintendo, contingent upon the completion of the merger. This monumental deal, marking the largest in video game industry history, had also encountered obstacles in Britain until recently. Following the ruling in California, Britain’s Competition and Markets Authority, which had initially opposed the transaction, expressed its readiness to reassess a restructured deal between Microsoft and Activision Blizzard, provided a new investigation took place.
It is a rarity for merger disputes to escalate to the appeals court level. However, more than a decade ago, the FTC lodged an appeal when it lost its battle against Whole Foods’ acquisition of Wild Oats. Nevertheless, the agency settled with the companies before a decision was reached by the appeals court.