Microsoft-Activision Blizzard: May Proceed with the $69bn Deal, Judge Rules

12the July 2023
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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 Microsoft-Activision 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.

The BIg Claims

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 with the Microsoft – Activision deal.

Brad Smith, the president of Microsoft, tweeted that the company expressed gratitude for the “quick and thorough” decision.

Bobby Kotick, the chief executive of Activision Blizzard, stated, “Our merger will benefit consumers and workers. It will foster competition instead of allowing dominant market leaders to continue their stronghold on our rapidly growing industry.”

Both companies have set a deadline of 18 July to finalize the transaction, with the possibility of an extension.

The Previous Block and Aftermath

Following the ruling, the UK’s Competition and Markets Authority (CMA), previously intending to block the deal, announced that Microsoft and Activision agreed to suspend legal proceedings regarding the transaction.

The companies will now work together to develop proposals addressing the concerns raised by the watchdog and restructuring the deal. The Competition Appeal Tribunal was scheduled to hear challenges against the CMA’s decision by the end of the month.

A CMA spokesperson stated their readiness to discuss proposals from Microsoft that address their concerns, adding, “To prioritize work on these proposals, Microsoft and Activision, in agreement with the CMA, have jointly submitted a request to the Competition Appeal Tribunal to stay litigation in the UK, serving the public interest.”

In April, the CMA blocked the deal due to concerns about potential harm to the cloud gaming market, enabling users to stream video games stored on remote servers to their devices. The FTC complaint also highlighted concerns about competition loss in console gaming, subscriptions, and cloud gaming. However, the EU has already approved the deal.

More Deals for the Leadership

To address the FTC’s concerns, Microsoft has committed to licensing Call of Duty to competitors, including a 10-year contract with Nintendo, contingent on the merger’s completion. During the five-day trial in June, Satya Nadella, Microsoft’s CEO, argued that the company had no incentive to exclude Sony’s PlayStation or other rivals in order to boost sales of Microsoft Xbox consoles.

At the heart of the Microsoft-Activision deal lies the quest for leadership in a gaming market projected to grow by 36% over the next four years to $321 billion, according to PwC estimates. While much of the trial’s testimony revolved around Call of Duty, Activision also produces other popular titles such as World of Warcraft, Diablo, and the mobile game Candy Crush Saga.

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