U.S. appeals court refuses FTC request to pause Microsoft deal for Activision

10:30 am Saturday, July 15th, 2023

(Reuters) -A U.S. appeals court on Friday rejected the Federal Trade Commission’s request to pause Microsoft’s $69 billion purchase of “Call of Duty” maker Activision Blizzard.

The decision removes one of the few remaining hurdles stopping Xbox maker Microsoft from closing the deal and expanding its gaming business.

The FTC had also asked Judge Jacqueline Scott Corley of the U.S. District Court in northern California for a similar stay but she rejected that request late on Thursday.

The FTC did not immediately return a request for comment.

Microsoft President Brad Smith said: “We appreciate the Ninth Circuit’s swift response denying the FTC’s motion to further delay the deal. This brings us another step closer to the finish line in this marathon of global regulatory reviews.”

The deal, the largest in the history of the videogame industry, still needs to be approved in Britain.

Now that its latest appeal has been rejected, the FTC may drop the fight, as it has in similar situations in the past. This happened most recently in February with Meta Platforms’ purchase of virtual reality content maker Within Unlimited. The FTC lost in federal court and dropped the challenge.

The merger agreement between Microsoft and Activision will expire on July 18. After July 18, either company will be free to walk away from the deal unless they negotiate an extension.

In Britain, the Competition and Markets Authority opposes the transaction on concerns about the impact on competition in cloud gaming. On Friday, it received a “detailed and complex” new proposal from Microsoft, and extended its deadline for a final ruling to Aug. 29, although it said it would aim to rule as soon as possible.

In the United States, the FTC had argued the deal would hurt consumers whether they played video games on consoles or had subscriptions because Microsoft would have an incentive to shut out rivals like Sony Group. Microsoft responded to that by offering 10-year licenses to rivals.

But on Tuesday, Judge Corley ruled the deal was legal under antitrust law and declined the FTC request to slap a preliminary injunction on it to give the FTC time to take it before an internal FTC judge in August.

The agency appealed the loss to the Ninth Circuit Court of Appeals, which issued its ruling on Friday.

“This case is about more than a single video game and the console hardware to play it. It is about the future of the gaming industry. At stake is how future gamers will play and whether the emerging subscription and cloud markets will calcify into concentrated, walled gardens,” the FTC wrote in a filing to the appeals court.

Microsoft has struck a deal to give rival Nintendo access to Activision’s “Call of Duty”, contingent on the deal closing. The company argues that agreements like this show it does not plan to hoard the games for use on its Xbox platform and subscription service.

(Reporting by Diane Bartz and Chris Sanders; Editing by Sandra Maler and Edmund Klamann)