12 July 2023 , 12:26
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We're delving into Microsoft’s options and remaining hurdles following the US Court’s decision to deny the FTC’s attempted blocking of the Activision Blizzard acquisition.
Nobody could have predicted that when Microsoft originally announced its intention to purchase Activision Blizzard back in January 18, 2022, we’d still be discussing it well over a year later. Alas, the Xbox-maker has hit several hurdles in its attempted acquisition, not least from global regulators such as the FTC in America and the CMA in the United Kingdom, who have both attempted to block the Microsoft Activision deal citing anti-competition ramifications in the video game space.
Following a five-day long battle in US Federal Court, however, this week it was revealed that Microsoft had won its case against the FTC’s preliminary injunction request, removing an important roadblock as the judge ruled in Microsoft’s favour. "The FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition," said Judge Corley.
This has led many people to wonder: what happens next with regards to the Microsoft Activision deal and when are we likely to see changes?
The first thing to mention is that while the US Court ruled against the FTC’s attempt to block the acquisition, there’s a strong likelihood that it will appeal this decision. That’s according to a new Bloomberg report anyway, which suggests that the appeal could be filed “as early as Wednesday” (the day after the US Court’s decision) as that’s what the FTC is “leaning toward”.
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Should the FTC’s appeal against – and therefore attempt to overturn – the judge’s approval of the Microsoft’s Activision acquisition, it could open up a whole new world of headaches for Xbox bigwigs like Phil Spencer, Sarah Bond, and Matt Booty, who already took to the stand in US Federal Court to give evidence. However, for now, Microsoft has successfully argued its case that acquiring Activision Blizzard won’t be anti-competitive ahead of the required July 18, 2023, deadline.
Deal or no deal
Providing that the FTC’s appeal isn’t approved, then, this means that Microsoft has the ability to complete the deal in the US and most other territories – even in Europe, where regulators there approved the deal as far back as May – without paying a $3 million penalty out to Activision Blizzard. Missing this deadline would be a major drawback, but Microsoft needs to consider whether or not it's willing to do so while it figures out how to work around the UK’s restraints as laid out by the CMA before or after it.
In a statement sent via email, made following the US Federal Court’s decision, a CMA spokesperson remarked “we stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our Final Report,” – in effect welcoming Microsoft back to the negotiating table.
The CMA blocked the Activision Deal in April following concerns over Microsoft’s potential dominance in the cloud gaming space. Its summarised report found that “the Merger may be expected to result in an SLC in cloud gaming services in the UK” and therefore the regulator elected to block the acquisition. The plan was for Microsoft to appeal against the CMA’s decision in a UK court under the scrutiny of the Competition Appeal Tribunal (CAT) later this month, but another Bloomberg report has since revealed that the appeal has been paused while further negotiations take place.
And so, at the moment, all signs point towards Microsoft renegotiating with the CMA about the terms of how its Activision Blizzard acquisition will take effect in the United Kingdom. If the two parties can’t come to an agreement, Microsoft will either be forced to close the deal without operating in the UK in future in quite the same way as the US, EU and other territories, or be forced to pay the $3 million penalty to Activision for not closing the deal in time while it appeals to the CAT in a UK court.