Microsoft Wins Court Battle Against FTC Over Activision Blizzard Acquisition [Update: FTC Appealing]

Federal Judge Jacqueline Scott Corley has ruled against the Federal Trade Commission’s attempt to block Microsoft from closing its $69 billion acquisition of Activision Blizzard until it can be fully reviewed, freeing up the companies to complete the deal before a July 18 deadline, and potentially paving the way for them to dramatically reshape the future of gaming in the years to come.

Judge Corley writes in her 53-page decision:

This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted—perhaps even terminated—pending resolution of the FTC administrative action. For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED.

On just about every point, the Judge found the FTC’s arguments wanting. In particular, she was unmoved by Harvard economics professor Robin Lee’s analysis that Microsoft would have a financial incentive to make Call of Duty and Xbox console exclusive, and wrote that it failed to take into account plans for the franchise to remain on PC, come to Switch, and be accessible through cloud gaming.

“Before the merger, a consumer wanting to play a Call of Duty console game had to buy a PlayStation or an Xbox,” Judge Corley wrote. “After the merger, consumers can utilize the cloud to play on the device of choice, including, it is intended, on the Nintendo Switch. Perhaps bad for Sony. But good for Call of Duty gamers and future gamers.”

What happens to the Microsoft Activision deal now?

The FTC can try to appeal the ruling, and still has its own anti-trust lawsuit in the works, but both appear unlikely at this juncture to derail the deal. The last obstacle in Microsoft’s way, the Competition and Markets Authority (CMA) blocking the deal in the UK, also appears to be disappearing. Microsoft President Brad Smith tweeted that it is currently set to negotiate with the CMA on final remedies to win back approval for the deal.

“We’re grateful to the court for swiftly deciding in our favor,” Microsoft Gaming CEO Phil Spencer tweeted after the decision was announced. “The evidence showed the Activision Blizzard deal is good for the industry and the FTC’s claims about console switching, multi-game subscription services, and cloud don’t reflect the realities of the gaming market.” Activision’s stock price is now the highest it’s been since the deal was first announced back in January 2022, approaching the planned sale price of $95 a share.

The decision comes after a five-day hearing in the Northern District Court of California which included testimony and major revelations from high-ranking industry figures ranging from Spencer to Sony Interactive Gaming CEO Jim Ryan. The FTC tried to argue that Microsoft’s deal to buy Activision Blizzard would have wide-ranging consequences that would harm consumers and lead to less competition in the console gaming market, while Microsoft defended the acquisition, claiming it was a necessary strategic move to counter Sony’s dominance with the PlayStation 5.

Much of the proceedings revolved around debating whether high-end console gaming—Xbox and PlayStation—should be considered separately from PC, Nintendo Switch, and other hardware, and whether franchises like Call of Duty are popular and profitable enough to single-handedly swing momentum from one company to another. At one point while on the stand, Spencer even held up his hand and promised the court that he would not remove Call of Duty from PS5, even as Microsoft and Sony struggled to agree to future licensing terms for the franchise behind closed doors.

Testimony during the trial revealed plenty of gamesmanship on both sides, as well as interesting details about other attempted acquisitions and exclusivity deals. Prior to making an offer for Activision, court documents revealed that Microsoft had also discussed buying Japanese publishers Sega and Square Enix. Corporate emails also showed that executives at the tech giant often discussed making new games exclusive, like Bethesda Software’s upcoming Indiana Jones project, in order to compete with Sony’s opposing deals.

Ultimately, Judge Corley wrote that those examples were unpersuasive because they weren’t live service, multiplatform multiplayer games like Call of Duty. She instead cited Minecraft’s continued non-exclusive availability as a counterexample. “While the FTC argues Microsoft’s ‘past conduct following similar transactions also demonstrates its likely anticompetitive nature,’ presumably referring to the ZeniMax acquisition, this ignores the Mojang/Minecraft acquisition,” she wrote.

Update 7/11/23 12:13 p.m. ET: Added more information about the court’s ruling and the CMA re-starting negotiations with Microsoft.

Update 2, 7/12/23 7:35pm ET: The FTC says it will be appealing.

FTC Blasted By Congress And Xbox Fans For Doing Its Job

Under chair Lina Khan, the Federal Trade Commission (FTC) has taken a lot of heat for trying to be aggressive in its approach to regulating tech companies and preventing monopolies. Now the FTC is facing criticism from both Republicans in Congress and very online Xbox fans for appealing a recent court decision that gave Microsoft the greenlight to finish its acquisition of Activision Blizzard.

After losing a preliminary injunction to block the $69 billion merger while it was under review, the FTC filed an appeal on July 12 with the Ninth Circuit. It’s since also requested a stay from the Northern District Court of California to prevent the deal from closing until the appeal is ruled on, as the acqusition’s July 18 deadline looms. “Your tax dollars at work,” tweeted Blizzard president Mike Ybarra, who was previously a longtime corporate VP at Microsoft.

Republicans in Congress took a similar stance. Testifying during an oversight hearing, Khan was hammered by GOP Representatives for pursuing too many antitrust cases and losing many of them. “You seem to be losing quite a bit, and I don’t say that to be disrespectful, but these are, after all, taxpayer funds,” Rep. Kevin Kiley (R-Ca.) said during the hearing (via IGN).

He continued, “The court not only rejected your assertion of a likely anti-competitive effect but found just the opposite. The record evidence points to more consumer access. So why should Americans have faith in your judgment when this Biden-appointed judge says you’re so far off the mark?” Rep. Darrell Issa (R-Ca.), meanwhile, called Kahn a bully for trying to prevent Microsoft from gaining an advantage over its Japanese competitor, Sony.

It didn’t take long for some of the loudest voices in the Xbox community to pile on. “Lina Khan is getting Fried, Roasted, Cooked and Buttered,” wrote influencer UniSensei, retweeting hearing footage like it was an E3 press conference. “OUCH! Maybe keep consumers and competitive markets a priority, and not a political line and you won’t get cooked, Khan,” tweeted YouTuber Colteastwood.

An antitrust scholar appointed to the FTC by President Biden in 2021, Khan was simple and unphased in her responses. “We fight hard when we believe there was a law violation, and unfortunately things don’t always go our way,” she said during the hearing. That is, after all, the agency’s mandate, regardless of what fans, executives, or politicians it might upset.


Activision, Microsoft Set To Merge After FTC Fails To Stop Deal

Image for article titled Activision Set To Become Part Of Microsoft After FTC's Last-Ditch Effort Fails

Photo: Anadolu Agency (Getty Images)

The U.S. Ninth Circuit Court of Appeals has denied the Federal Trade Commission’s final request to pause Microsoft’s takeover of Activision Blizzard, likely paving the way for the biggest-ever merger in gaming to finally move forward after a more than year-long regulatory saga.

The FTC had sought to have the acquisition kept on hold ahead of a July 18 deadline while appealing a ruling from the Northern District of California that sided with Microsoft. It was the antitrust agency’s last chance to stop the historic $69 billion merger that would see major gaming franchises like Call of Duty, World of Warcraft, and Candy Crush all become an extension of Xbox.

Regulators argued that the federal court had ignored evidence that Microsoft would have reasonable incentive to potentially make those franchises exclusives to its console and cloud gaming platforms in order to corner the market. Microsoft in turn blamed the FTC for using delay tactics and underselling a massive $3 billion breakup fee Microsoft would have to pay to Activision if the deal ended up not going through for some reason.

The Ninth Circuit will still handle that appeal, but denied the FTC’s motion to block the merger until that ruling was made, giving Microsoft the greenlight to close its deal on July 17.

It’s been a long journey up to this point, full of twists and turns, including abroad in the UK, the only country to block the deal so far. That country’s Competition and Markets Authority (CMA) had denied the merger on the grounds that it would give Microsoft too much of an advantage in the nascent market of cloud gaming.

Following the FTC’s initial court defeat earlier this week, however, the CMA announced it was back negotiating with Microsoft over new ways to resolve the antitrust conflicts. It’s now extended its final deadline for approval of the deal into August, suggesting it’s prepared to accept the tech giant’s latest concessions.

While nothing’s final until it’s final, it now looks like Microsoft’s shocking acquisition of one of the biggest game publishers in the world is about to become a reality, and will soon have the potential to completely reshape the video gaming landscape in the process. Or maybe Xbox owners will just get a bunch more free games on Game Pass. Time will tell.

Here’s Who’s Eligible For The Fortnite FTC Settlement Refunds

A Fortnite character gestures to a bunch of money.

Image: New Africa / Epic Games / Kotaku (Shutterstock)

Good news, everyone: now Fortnite can pay you. After a spat with the FTC wherein Epic Games settled for $245 million dollars, the Federal Trade Commission has launched a webpage for eligible Fortnite players to get some money back.

In December of 2022, Fortnite developers Epic Games and the FTC settled over allegations that the video game company ran afoul of the Children’s Online Privacy Act. Signed into law in 2000, the act seeks to protect children under 13, specifically where it concerns marketing tactics and privacy. The FTC accused Epic Games of using “design tricks, known as dark patterns, to dupe millions of players into making unintentional purchases.” The $245 million payout marks the FTC’s “largest refund amount in a gaming case, and its largest administrative order in history.”

The FTC also required Epic Games to “adopt strong privacy default settings for children and teens, ensuring that voice and text communications are turned off by default.”

Who’s eligible and how much cash can you get from the Fortnite settlement?

The FTC laid out three broad categories for folks eligible to receive some money from the Fortnite settlement:

• You were charged in-game currency for items you didn’t want between January 2017 and September 2022

• Your child made charges to your credit card without your knowledge between January 2017 and November 2018

• Your account was locked between January 2017 and September 2022 after you complained to your credit card company about wrongful charges

As stated on the FTC’s website, the specific dollar amount of each payout is yet to be determined as it “will depend on several factors, including how many people file a claim.”

Additionally, the FTC doesn’t have a set date for when payments are likely to be issued, though it promises an update to the claims page. All claims must be filed by January 17, 2024, and you’ll need to be at least 18 years old (or have a parent or guardian complete the form for you) and must have a valid Epic Account ID (in addition to meeting the criteria listed above).

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