A federal appeals court has denied the Federal Trade Commission’s request to temporarily stop Microsoft (MSFT) from completing its acquisition of video game maker Activision Blizzard (ATVI), removing one of the remaining obstacles to closing the deal. $69 billion deal.
The ruling by a three-judge panel of the 9th Circuit Court of Appeals upholds a ruling by a California federal district court judge on Tuesday saying that would not prevent the transaction from proceeding while a separate FTC antitrust challenge unfolds in court.
The deal still needs approval from UK regulators. The agency, the Competition and Markets Authority (CMA), on Tuesday suspended its legal proceedings to block the acquisition in favor of new negotiations with Microsoft. Microsoft has agreed to pay Activision a $3 billion severance fee if the combination does not close by that date.
“We appreciate the Ninth Circuit’s prompt response in denying the FTC’s motion to further delay the Activision settlement,” Microsoft Chairman and Vice Chairman Brad Smith said. wrote on Twitter. “This brings us one step closer to the finish line of this marathon of global regulatory reviews.”
Legal experts see the decision as a victory for Microsoft, even though the underlying FTC lawsuit alleging the deal would harm competition remains pending.
They believe Microsoft’s costs to keep the deal afloat while awaiting the outcome of the FTC lawsuit would reach a tipping point, given that the agency has no deadline to resolve its case.
The FTC first filed a challenge to block the merger in December. His lawsuit, filed in the agency’s internal court, alleges that merging the two companies would remove competition in three markets: game consoles, subscription content and cloud gaming.
The acquisition, if completed, would be the largest in Microsoft’s history and the largest in the gaming industry.
Microsoft, owner of the Xbox game console, controlled 16% of the console market in 2021. Microsoft said in court documents that since 2021, its share of console sales had increased to 21%, although it remained at third place behind PlayStation (SONY) and Nintendo. (NTDOY).
The key to tying is Activision Blizzard’s lucrative “Call of Duty” franchise. The game series earns Billions from Activision Blizzard each year, with the latest installment, 2022’s “Call of Duty: Modern Warfare II,” grossing $1 billion in sales in its first 10 days on the market.
Adding the other game franchises Call of Duty and Activision to Microsoft’s existing first-party titles, including “Halo” and “Forza,” would catapult Microsoft past Nintendo (NTDOY) to make the company the second-largest home console maker. . by revenue behind Sony (SONY). It would also put Microsoft behind Tencent and Sony as the third-largest games company by global revenue.
Global regulators, including those in the EU, Brazil, China, Japan and South Korea, have already approved the deal.
The UK’s CMA has expressed concern that the deal could make Microsoft so dominant in cloud gaming, that it could lead to “reduced innovation and less choice for UK gamers over the years. coming”.
To assuage regulators’ concerns that Microsoft would abuse the deal to isolate its main game “Call of Duty” from rivals, the company signed deals with Switch console owner Nintendo and Nvidia, promising to maintain the game available on competing platforms. for at least 10 years.
The FTC did not immediately respond to Yahoo Finance’s request for comment on the appeals court’s decision.
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