Microsoft’s proposed, record-breaking $69 billion acquisition of video game company Activision Blizzard was blocked by a federal judge on Tuesday, giving more time for an antitrust scrutiny of the deal.
US District Judge Jacqueline Scott Corley in San Francisco ruled in support of an injunction requested by the Federal Trade Commission that will prevent Microsoft from completing the deal.
In a court case Monday, the commission had sought both an injunction and an injunction to stop Microsoft’s acquisition of the California company behind hit games like Call of Duty, World of Warcraft and Candy Crush Saga.
Microsoft, maker of the Xbox gaming system, has been trying for months to gain global approval for the merger.
While a number of countries have approved the acquisition, regulators in two major economies – the US and UK – have taken action to stop it, arguing that it could stifle competition in the video game market.
Microsoft’s proposed $69 billion acquisition of video game company Activision Blizzard was blocked by a federal judge Tuesday, giving more time for antitrust scrutiny of the deal. “We welcome the opportunity to plead our case in federal court,” Microsoft President Brad Smith (pictured) said Monday
“We welcome the opportunity to present our case in federal court,” Microsoft President Brad Smith said Monday.
“We believe that accelerating the legal process in the US will eventually lead to more choice and competition in the marketplace,” he added.
Judge Corley said her order temporarily blocking the deal was “necessary to maintain the status quo” while the Federal Trade Commission’s litigation against it continues.
The hurdles for obtaining a restraining order are lower than for obtaining a restraining order that blocks the deal. A hearing on the Commission’s request for an injunction is scheduled for June 22.
The ruling came a day after the FTC asked a federal court to block Microsoft from completing Activision Blizzard’s blockbuster purchase as the company considers regulatory action.
“An injunction is necessary to prevent… preliminary damages” while the FTC is determining whether “the proposed acquisition violates U.S. antitrust laws,” the regulator said in the filing.
Tuesday’s ruling prevents Microsoft from moving forward with the deal before the court decides whether to issue an injunction requested by regulators.
The FTC took Microsoft to court last year to block the merger, but that case was brought before the agency’s internal judge in a trial scheduled to begin Aug. 2.
Lina Khan, an antitrust lawyer who campaigned to break up the biggest tech companies before being nominated to the post by President Joe Biden in 2021, is commissioner of the FTC
US District Judge Jacqueline Scott Corley in San Francisco ruled in support of an injunction requested by the Federal Trade Commission that will prevent Microsoft from completing the deal
The Activision Blizzard booth during the Electronic Entertainment Expo on June 13, 2013 in Los Angeles
The commission said it took its case to federal court this week over concerns that Microsoft is attempting to close the deal immediately before the trial begins, which would make it “difficult, if not impossible” to reverse course if the Acquisition later made found unlawful.
The regulator is headed by Lina Khan, an antitrust scholar who campaigned to break up the biggest tech companies before being nominated to the post by President Joe Biden in 2021.
Khan has accused Meta, Facebook’s parent company, of stifling competition by buying up startups, and the FTC has launched investigations into Amazon.
The US Department of Justice, meanwhile, has filed lawsuits alleging that Google violated antitrust laws in both online search and advertising.
It’s usually easier to win a merger-blocking case by going to an internal FTC judge than a US district court. However, an FTC judge is unable to issue an injunction to prevent a deal from being completed.
Microsoft has in recent weeks agreed to give Ubitus and Boosteroid access to Activision games on their cloud-based video game streaming services for 10 years in a bid to placate the UK’s Competition and Markets Authority.
And it’s signed a deal with Nintendo, which doesn’t currently have access to Call of Duty.
Regulators feared Microsoft would only offer Activision games through its Game Pass subscription service, negatively impacting competitors launching their own cloud gaming services.
Microsoft has made concessions to appease regulators, including allowing Nintendo to sell Call of Duty, among other things
Regulators feared Microsoft would only offer Activision Blizzard games through its Game Pass subscription service, which would negatively impact competitors launching their own cloud gaming services
In April, the CMA said it was only concerned about competition issues in the cloud and not the console market, where Microsoft competes with Sony’s PlayStation.
Microsoft CEO Brad Smith said publicly that Khan’s FTC does not want to discuss such adjustments.
The FTC has claimed that Microsoft, as a major console maker and owner of Activision, has too much market power.
“FTC points out that 10 of the top 15 selling console games between 2010 and 2019 were Call of Duty games and the newest game in the franchise – Modern Warfare II, released in 2022 – generated $1 billion in revenue in its first 10 days “Release,” said the law firm Arnold & Porter in a statement to its clients.
Xbox owner Microsoft launched a takeover bid for Activision Blizzard early last year with the goal of establishing the world’s third-largest gaming company by revenue, after Chinese company Tencent and Japanese PlayStation maker Sony.
While the European Union gave the deal the green light, the UK’s Competition and Markets Authority (CMA) blocked it in April on the grounds that it would harm competition in cloud gaming.