Microsoft may proceed with $69bn Activision Blizzard deal, judge rules

A US judge has ruled that Microsoft may go forward with its planned $69bn acquisition of video game maker Activision Blizzard, while the UK competition watchdog said it was ready to discuss changes answering its concerns over the deal.

The US competition watchdog, the Federal Trade Commission (FTC), had originally asked the judge to stop the proposed deal, arguing it would give Microsoft, maker of the Xbox gaming console, exclusive access to Activision games including the bestselling Call of Duty.

The agency’s concern was that the deal could preclude the availability of those video games on other platforms.

But Judge Jacqueline Scott Corley wrote on Tuesday: “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 FTC said it was “disappointed” in the outcome. “In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers,” said a spokesperson.

In its arguments, the FTC has said Microsoft would be able to use the Activision games to leave rival console makers like Nintendo and market-leader Sony out in the cold.

Microsoft’s president, Brad Smith, tweeted that the company was “grateful” for the “quick and thorough” decision.

Bobby Kotick, Activision Blizzard’s chief executive, said:“Our merger will benefit consumers and workers. It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry.”

Both companies have set a deadline of 18 July to complete the transaction although that could be extended.

Shortly after the ruling, the UK’s Competition and Markets Authority (CMA), which had previously announced it would block the deal, said Microsoft and Activision had agreed to halt legal proceedings around the transaction.

The companies will now attempt to thrash out proposals to restructure the deal and meet the watchdog’s concerns. The Competition Appeal Tribunal was due to hear challenges against the CMA’s decision at the end of the month.

A CMA spokesperson said the organisation was ready to discuss proposals from Microsoft that would meet its concerns. “In order to be able to prioritise work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of litigation in the UK would be in the public interest and all parties have made a joint submission to the Competition Appeal Tribunal to this effect,” they said.

The CMA had blocked the deal in April because of concerns it would damage the market for cloud gaming, which allows users to stream video games stored on remote servers to their devices. The FTC complaint had cited concerns about loss of competition in console gaming, as well as subscriptions and cloud gaming, while the EU has already cleared the deal.

To address the FTC’s concerns, Microsoft has agreed to license Call of Duty to rivals, including a 10-year contract with Nintendo, contingent on the merger closing. During the five-day trial in June, Microsoft’s chief executive, Satya Nadella, argued that the company would have no incentive to shut out Sony’s PlayStation or other rivals in order to sell more Microsoft Xbox consoles.

At issue in the Microsoft-Activision deal is leadership in a gaming market whose sales are expected to increase by 36% over the next four years to $321bn, according to a PwC estimate. And while much of the testimony in the recent trial focused on Call of Duty, Activision produces other bestsellers like World of Warcraft, Diablo and the mobile game Candy Crush Saga.