What you need to know
- Microsoft is trying to purchase Call of Duty-maker Activision-Blizzard for $69 billion dollars.
- The United States Federal Trade Commission is trying to block the deal, and has applied for a federal injunction that overlaps with the deadline for the deal closing.
- Today, federal Judge Corley issued a final decision on the injunction: the deal can close.
- Timelines for what happens next now is uncertain. Read on for some analysis.
Over the past couple of weeks, the FTC and Microsoft have come to blows in federal court over the big Xbox merger with Activision-Blizzard-King (ABK). The ABK deal would give Microsoft control over Call of Duty, World of Warcraft, Diablo, Candy Crush, Hearthstone, and various other mega-franchises as Xbox tries to boost its prospects in the gaming market against players like Apple, Google, and PlayStation.
Sony along with PlayStation lead Jim Ryan has been a huge opponent of the deal, working across global regulators to get the deal blocked. The European Union delivered the first major blow against that effort, approving Microsoft’s merger with remedies forcing Microsoft to support competitors in the cloud gaming market — something Microsoft had always offered to do regardless. The UK CMA, backed by the U.S. FTC, however, blocked the deal a few weeks ago — Microsoft can theoretically close around the United Kingdom though, given the UK’s decreased relevance in global affairs and the video game market in general. One market that Microsoft cannot close around, however, is the United States.
As such, the U.S. Federal Trade Commission (FTC) has led an ideological crusade against the deal, despite all logic to the contrary. PlayStation, Tencent, Apple, and Google are all bigger than Microsoft by gaming revenue, and most would remain so even after the deal. Still, the size of the deal has upset elements of the U.S. regulatory community, who arbitrarily seem to view it as “too large” at $69 billion dollars. The FTC seems to be over-reacting to the deal, whose efforts seem emblematic of historical regulatory failures such as allowing Google to control all of search, and allowing Facebook to control virtually all of social media. I would argue they picked the wrong fight, here, since a damaged Xbox would give PlayStation even more dominance in a shrinking market.
In any case, Microsoft has been arguing its points in federal court, as the FTC seeks to gain an injunction. The injunction request was timed carefully to cause as much damage to the deal as possible. Microsoft and ABK have to close the deal by July 18 according to their agreement, leaving very little time to negotiate an extension between all the concerned parties. If the deal falls through, Microsoft would have to pay ABK $3 billion dollars for the trouble.
Today, U.S. federal Judge Corley has finally ruled on the matter, essentially allowing the deal to close. The FTC lost.
“After considering the parties’ voluminous pre-and-post hearing writing submissions, and having held a five-day evidentiary hearing, the Court DENIES the motion for preliminary injunction.” (Via FossPatents).
Analysis: So what’s next?
IF THE DEAL ISNT DEAD (DELETE AS APPROPRIATE):
With Corely ruling in Microsoft’s favor, the stage is set for Microsoft and ABK to effectively close the deal without the FTC’s approval. The FTC could still win in court at a later date, and potentially force divestiture of the entire ABK operation even after Microsoft had closed, but it’s potentially unlikely. The FTC has other big court battles it’s preparing for, including one that examines Amazon’s shopping logistics business, and some have expected the FTC to abandon the fight with this injunction dropped. It seems unlikely that it will, though.
From here, the deal still faces some intense hurdles, from the UK’s CAT-CMA hearings to other regulators in other major markets, who could also create some legal headaches down the road. Don’t expect the saga to end just yet, though.
Even without Activision-Blizzard, Xbox lead Phil Spencer has said in recent interviews that ABK is about accelerating their vision for gaming on mobile, PC, and console, as opposed to being the entire vision. Court documents suggested Microsoft was interested in buying other big players in mobile, including Square-Enix, Sega, and more, potentially giving Microsoft another path toward clout in the mobile gaming space. The lineup of upcoming Xbox games looks stronger than ever, too, many of which will launch day one into Xbox Game Pass.
