A US appeals court on Friday rejected a bid by federal regulators to block Microsoft’s $68.7 billion deal to buy video game maker Activision Blizzard. Weaken competition.
A brief ruling by a three-judge panel of the 9th US Circuit Court of Appeals concluded that there was no reason to issue an injunction preventing Microsoft from completing its nearly 18-month-old deal to acquire the popular video maker. Games like Call of Duty.
The Redmond, Washington, software maker faces $3 billion in termination fees if the deal isn’t completed by Tuesday.
“This brings us another step closer to the finish line in this marathon of global regulatory reviews,” Microsoft President Brad Smith said in a statement.
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The appeal, filed by the US Federal Trade Commission, was a last-ditch effort by antitrust enforcers to stop the merger after another federal judge ruled earlier this week against the agency’s attempt to block the merger. As early as this weekend, the FTC was seeking an injunction to prevent Microsoft from moving to terminate the agreement.
The FTC declined to comment on the ruling.
A previous ruling by U.S. District Judge Jacqueline Scott Corley, published Tuesday, said the FTC had not shown the agreement would cause substantial harm. She focused in part on Microsoft’s promises and financial incentives to make Call of Duty available to rivals such as Sony’s PlayStation and Nintendo’s Switch for its own Xbox gaming system.
In its appeal, the FTC argued that Corley made “fundamental errors.”
“This case is about more than a single video game, it’s about the console hardware to play it,” the FTC said. “This is about the future of the gaming industry. At stake is how gamers of the future will play, and whether the emerging subscription and cloud markets will become centralized, walled gardens or evolve into open, competitive landscapes.
The case is a difficult test for the FTC’s swift scrutiny of the tech industry’s business practices under Chairwoman Lina Khan, who was appointed by President Joe Biden in 2021. The standing legal doctrine favors mergers between companies that do not directly compete with each other.
Khan came under fire from Republicans at a House hearing Thursday on the agency’s enforcement record, and a California lawmaker questioned whether the FTC’s pressure on Congress to update its antitrust rules is defeating the fight against mergers.
“Of course not,” replied Khan, “Unfortunately, things don’t always go our way.”
Instead of a trial scheduled to begin in August before the FTC’s in-house judge, Corley, the Biden nominee, applied the wrong legal standard, requiring lawyers to prove their entire case now.
However, the FTC had asked Corley for an emergency hearing in a request to stop Microsoft and Activision Blizzard from rushing to close the deal. The agency argued that if the deal closes now, it will be difficult to reverse the merger if it is later found to violate antitrust laws.
In its response to the appeal, Microsoft countered that Activision could “decline Blizzard” later. It defends the deal in the long run as good for gaming.
The deal still faces a hurdle in the United Kingdom, but it looks close to surviving.
British antitrust regulators on Friday extended the deadline for issuing a final order on the proposed merger, allowing them to consider Microsoft’s “detailed and complex submission”.
The deal was rejected by the Competition and Markets Authority over fears it would stifle competition for popular game titles in the fast-growing cloud gaming market.
But the UK watchdog appears to have softened its stance after Corley defeated attempts by US regulators to block the deal.
The authority says it pushed back its original deadline by six weeks to allow Microsoft to go through a response detailing “material changes in circumstances and special reasons” why regulators should not issue an order rejecting the deal.