Merger ahead: Judge says Microsoft can go ahead on Activision Blizzard buy

A federal judge has handed Microsoft a major victory by declining to block its looming $69 billion takeover of video game company Activision Blizzard. Regulators sought to ax the deal saying it will hurt competition.

U.S. District Judge Jacqueline Scott Corley said in a ruling that the merger deserved scrutiny, noting it could be the largest in the history of the tech industry. But federal regulators were unable to show how it would cause serious harm and wouldn’t likely prevail if they took it to a full trial, she wrote.

The Federal Trade Commission, which enforces antitrust laws, “has not raised serious questions regarding whether the proposed merger is likely to substantially lessen competition” between video game consoles or in the growing markets for monthly game subscriptions or cloud-based gaming, Corley said.

A ruling favorable to Microsoft was not a surprise after the company’s lawyers had the upper hand in a 5-day San Francisco court hearing that ended late last month. The proceeding showcased testimony by Microsoft Chief Executive Officer Satya Nadella and longtime Activision Blizzard CEO Bobby Kotick, who both pledged to keep Activision’s blockbuster game Call of Duty available to people who play it on consoles — particularly Sony’s PlayStation — that compete with Microsoft’s Xbox.

“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,” Kotick said in a written statement after Tuesday’s ruling.

The FTC had asked Corley to issue an injunction temporarily blocking Microsoft and Activision from closing the deal before the FTC’s in-house judge can review it in an August trial.

Both companies suggested that such a delay would effectively force them to abandon the takeover agreement they signed nearly 18 months ago. Microsoft promised to pay Activision a $3 billion breakup fee if the deal doesn’t close by July 18.

The FTC hasn’t said whether it will appeal Corley’s ruling.

“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” FTC spokesperson Douglas Farrar said in a prepared statement. “In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”

The decision is a setback for the FTC’s heightened scrutiny of the technology industry under Chairperson Lina Khan, who was installed by President Joe Biden in 2021 because of her tough stance on what she sees as monopolistic behavior by tech giants such as Amazon, Google and Facebook parent Meta.

Another judge rebuffed the FTC’s attempt earlier this year to stop Meta from taking over the virtual reality fitness company Within Unlimited. And on Thursday, Khan is expected to face tough questioning from Republicans in Congress who have called her to testify at a House hearing about the commission’s record of enforcement actions as well as her management of the agency staff.