Microsoft may soon become Activision’s new owner. | Eric Thayer/Bloomberg via Getty Images
A judge has denied the agency’s request for a preliminary injunction to stop the merger.
Microsoft’s merger with video game giant Activision Blizzard just got a major power-up: a federal district court judge in California has turned down the Federal Trade Commission’s request for a preliminary injunction to stop it.
The agency is currently suing Microsoft and Activision to block the massive $69 billion acquisition over competition concerns, with the trial scheduled to begin in August. With the FTC’s request to stop the merger denied, it’s likely that the companies will move forward to complete it, and that the FTC will drop its case entirely.
“We’re grateful to the court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution,” Brad Smith, vice chair and president of Microsoft, said in a statement.
“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” FTC spokesperson Douglas Farrar told Vox.
The FTC sued Microsoft and Activision Blizzard last December to stop their planned $69 billion merger, saying the deal would unfairly harm competition in a gaming market worth hundreds of billions of dollars. Microsoft will become the third-largest gaming company in the world, behind Tencent and Sony, if the deal goes through. But the agency doesn’t have the authority to stop the acquisition from happening in the meantime — thus the injunction request. But Judge Jacqueline Scott Corley said she didn’t think the FTC would win its case, and so the companies should be allowed to go through with their merger.
“The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets,” the judge wrote.
That’s a big setback for an agency that has, under chair Lina Khan, intensely scrutinized mergers and acquisitions that will make big companies even bigger, giving them a larger share of a market with fewer competitors in it.
Big Tech isn’t the only industry the FTC has focused on, but its size and power — Apple, Microsoft, Google, Amazon, and Meta are in the top 10 largest companies in the world by market cap as of this writing — makes it an obvious target, one Khan focused on in her pre-FTC work. Under her, the agency continued its lawsuit against Meta that seeks to unwind its acquisitions of Instagram and WhatsApp, recently sued Amazon over how difficult the company allegedly makes it to cancel Prime, and settled with Google over a deceptive advertising case. It has yet to win any major victories here, but such cases may take years, if not decades, to resolve. The FTC hasn’t challenged some Big Tech mergers, like Amazon’s acquisition of MGM, and its already lost a few other battles, like its case against Meta’s acquisition of VR game company Within. When the FTC lost a similar bid to get an injunction to prevent that merger, it dropped the case. It wouldn’t be at all surprising if it did the same now.
The weeklong hearing touched on several parts of Microsoft’s business, but the big argument appeared to center on the Call of Duty franchise and if Microsoft would continue to make it available for rival Sony’s PlayStation should it be allowed to acquire Activision. Judge Corley said she believed the evidence showed that more consumers would get access to Call of Duty and other Activision games, rather than fewer. Microsoft has a deal to bring Call of Duty to Nintendo Switch consoles for at least 10 years if the merger closes, for example.
The two companies can merge as soon as a temporary restraining order ends at 11:59 pm on July 14. The FTC still has a chance to appeal the decision, and could get a stay to delay the merger further in the process.
“In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers,” Farrar, the FTC spokesperson, said.
“When Microsoft’s own emails say they are building a ‘moat’ and trying to ‘spend’ their competitors ‘out of business,’ that should be enough for the court to hit pause,” Lee Hepner, legal counsel at the American Economic Liberties Project, an antitrust advocacy group, said in an emailed statement. “The FTC should appeal this decision and pursue an emergency stay of Judge Corley’s order so that it can continue its administrative case against Microsoft’s monopoly ambitions.”
Should the FTC drop the case, Microsoft still has one boss left in its merger battle: the United Kingdom, which blocked it over concerns that it would harm the nascent cloud gaming market. Microsoft appealed, and a hearing is scheduled for late July, though it could be months before a decision is reached there. The UK’s competition authority has said that its decision to block the merger applies globally, though if the companies are somehow able to carve that region out of their services, it could still go forward.
Update, July 11, 11:55 am: This story has been updated to include comment from Microsoft, the FTC, and the American Economic Liberties Project.