Microsoft Wins FTC Fight in the US to Acquire Activision Blizzard - News
by William D'Angelo , posted on 11 July 2023 / 5,566 Views
Judge Jacqueline Scott Corley after listening to five days of testimonies in the Microsoft vs FTC hearing has denied the preliminary injunction for the FTC and ruled in favor of Microsoft.
This ruling allows Microsoft to close its Activision Blizzard deal ahead of the current July 18 deadline as the temporary restraining order (TRO) that allows the FTC to appeal the decision has been reduced to three days as it will end on Friday, July 14 at 11:59 pm PT. However, this depends if Microsoft is willing to close the deal despite the Competition and Markets Authority (CMA) of the UK blocking the deal.
"Four weeks ago, the FTC filed this action to preliminarily enjoin the merger pending completion of the FTC administrative action," reads the ruling by Judge Corley. "Because the merger has a July 18 termination date, expedited proceedings were commenced. After considering the parties’ voluminous pre-and-post hearing writing submissions, and having held a five-day evidentiary hearing, the Court DENIES the motion for preliminary injunction.
"The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets."
Judge Corley concluded, "Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services."
Activision Blizzard CEO Bobby Kotick in an email to employees stated, "Today a U.S. federal judge ruled in our favor, denying the Federal Trade Commission’s attempt to block our merger with Microsoft.
"We’re grateful to the court for the way this process was handled and the thoughtfulness of the decision. The U.S. joins the 38 countries where our deal can proceed—these decisions are based on facts and data that show our merger is good for players and for competition in the industry.
"We’re optimistic that today’s ruling signals a path to full regulatory approval elsewhere around the globe, and we stand ready to work with UK regulators to address any remaining concerns so our merger can quickly close."
Microsoft Gaming CEO Phil Spencer in a statement on Twitter said the team is "grateful to the court for swiftly deciding in our favor. 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.
"Since we first announced this deal, our commitment to bringing more games to more people on more devices has only grown. We’ve signed multiple agreements to make Activision Blizzard’s games, Xbox first party games and Game Pass all available to more players than they are today.
"We know that players around the world have been watching this case closely and I’m proud of our efforts to expand player access and choice throughout this journey."
1/We're grateful to the court for swiftly deciding in our favor. 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.
— Phil Spencer (@XboxP3) July 11, 2023
3/We know that players around the world have been watching this case closely and I’m proud of our efforts to expand player access and choice throughout this journey. END
— Phil Spencer (@XboxP3) July 11, 2023
Microsoft Vice Chair and President Brad Smith in his own statement said, "We're grateful to the Court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution. As we've demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory concerns."
Our statement on today's decision: pic.twitter.com/jRDD8PhBeT
— Brad Smith (@BradSmi) July 11, 2023
Smith in a statement added, "After today’s court decision in the U.S., our focus now turns back to the UK. While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA.
"In order to prioritize work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of the litigation in the UK would be in the public interest and the parties have made a joint submission to the Competition Appeal Tribunal to this effect."
Our statement on the mutual request with the CMA for a pause of our appeal in the UK: pic.twitter.com/8Aky2IJjxS
— Brad Smith (@BradSmi) July 11, 2023
The UK CMA in a statement said, "We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our Final Report. In order to be able to prioritise work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of litigation in the UK would be in the public interest and all parties have made a joint submission to the Competition Appeal Tribunal to this effect."
Microsoft's Activision Blizzard acquisition has also been approved in South Africa, South Korea, China, the European Union, Ukraine, Japan, Chile, Brazil, Saudi Arabia, and Serbia.
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.
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Shouldn't be too surprising considering it was obvious the FTC had an incredibly weak case and were more concerned about protecting Sonys position as opposed to doing their job and protecting the consumer.
Not the harm to sony? So what's the point of market regulations and so on to protect companies
Regulators are there to protect the consumers not companies.
Market regulations are there to protect consumers. If the roles were flipped and Xbox was the market leader while trying to buy ActiBlizz, the FTC could make a strong case that it would be anticompetitive and could harm consumers as it’s the number 1 market leader only becoming substantially stronger. That’s not the case here. Regulators don’t protect companies. Especially market leaders.
Throughout the entire court process, the FTC lawyers rarely brought up consumers and consistently were protecting Sony's interests. That's when the Judge had to remind them who they're supposed to be there for. Protecting a market leader by default is anti-competitive.
So being worried against a future monopoly isn't an issue? They probably should have built a case around itzn because this deal changes everything. When they all go to gamepass, especially cod, and sony is locked out, they'll be forced to try and adopt a gamepass model , or risk being left for dead.
Even worse for the FTC case, since this was only to get a PI the standard was lower than the actual case planned in August.
The FTC only had to prove they have the potential to succeed later in the actual court challenge and they failed.
But hey, getting a federal judge telling them "It's not the harm to Sony we care about. It's the harm to consumers." was gold.
Yes this is finally over, and the CMA is also caving out. This is going to be closed by end of next week.
The CMA caving is even bigger news than the FTC failing to get a preliminary injunction, IMO.
That's not accurate.
There are four requirements for a PI.
Showing that they have the potential to succeed in court is NOT one of the standards. If you can not show any potential of success, then the case should be dismissed. What you would have to prove is a substantial likelihood of success, which is a higher bar. There could still be a reasonable chance of victory, but no injunction.
In addition, it needs to be shown that there will be irreparable harm caused if an injunction is not granted. That public interest is in favor of injunction. And the "balance of equities" must favor the injunction.
Not saying that they have any chance at success in court, and I don't know what the exact reasoning is here, but it takes more than just the potential to succeed to grant a PI.
The likelihood of success only has to be reasonable at this point which means more likely than not, it's not a highly likely bar that the FTC would have faced in an actual court case.
So yeah maybe I misrepresented things with simple potential but it is still a way lower bar to meet than the actual court case which was the important point I was making.
and yes the other box must all be checked but it's only logical with the likelihood of success, you can't just win a PI case by showing the likeliness of success in demonstrating ... nothing, there must be substance to it.
But, because that is only one of four factors, we cannot tell anything about the likelihood of success.
If for instance the judge believed that there was a 99.9% chance the FTC would win (I'm sure that is not the case) but there would be no irreparable harm if Microsoft was allowed to continue until the case concluded, the injunction would likely be denied.
So, based solely on the fact that the injunction was denied, we can't say anything really about the likelihood of success. I'm sure the opinion on the motion says more.
Those box are not independent of each other, they are all integral part of the same goal. which is to be granted a PI the FTC must show the likeliness of succeeding in demonstrating arm to consumer/competition in greater proportion than the arm of depriving someone or a collective of their constitutional right to acquire/sell property.
Even if FTC fail to demonstrate arm to consumer/ competition they also fail to show le likeliness of demonstrating such. Even if they fail at demonstrating the arm is in greater proportion than the arm of depriving the acquiring party to buy property that also mean they fail at showing the likeliness of demonstrating such.
The likelihood of success can only be achieve if all the other are achieve.
Sorry, that's still not right.
You are mentioning harm, but you missed the key part, which is irreparable harm. Even if the court agrees that the FTC is 90% likely to win, and that there would be harm to consumers, they STILL would not grant an injunction, if the harm was not irreparable.
This happens a lot in the context of patent infringement. Suppose you are selling a product that is similar to mine, and that I am suing you for lost sales, and demanding that your product be removed from the shelves to prevent more lost sales via a PI. And lets say that you have more than enough money to pay me back for past and future lost sales if I were to win. Suppose also that the court believes I have a 90% chance of success.
They would not grant an injunction. Because no matter how likely I am to win, I could not, in this scenario, show that I will be irreparably harmed if I don't get an injunction. If I win, I could get paid, and I'll be exactly where I should had the infringement never occurred. This is a simplified example, but this happens pretty frequently in IP law. Likelihood of success has really nothing to do with whether or not irreparable harm will be suffered and vice versa.
https://supreme.justia.com/cases/federal/us/555/7/ Good case to start with if you're really interested in learning about preliminary injunctions. But they are, as the Supreme Court says here, an "extraordinary remedy". They are not easy to get, and not getting one doesn't necessarily indicate you are likely to lose a case.
Yeah, we knew the FTC was going to be a non-issue the moment they published their reasoning for being against the deal.
That trial was an utter embarrassment on the FTC's part. Glad to see my tax dollars being put to good use xD
It's actually worse than an embarrassment. The FTC would be better served only bringing forward cases that have a high degree of success. The FTC should want businesses to fear their administrative actions. Continuing to bring forward spurious cases that are likely to lose will reduce the FTC's clout, and the fear factor of the threat of an FTC action. Ridiculous.
Great news. I'm looking forward to not seeing this in the news again.
No one should be surprised.
FTC got their asses handed to them in court.
This is the tipping point. We can now say with certainty that the deal will close. The UK will not be able to stop it. At most, they'll get some concessions from MS, or MS will spin off part of the UK business.
So what countries are still blocking the buyout?
I think just the UK.
What a massive day in gaming. I think the consolidation wars will continue on and we will likely see some sort of response from Sony and other major payers. Since this has passed, I can't see any other merger from being stopped. Gamers will probably have to buy into multiple ecosystems which in all likelihood was an inevitability in any case. Just wish the writing wasn't on the wall.
On the plus side, MS's future and presence in gaming industry is pretty much guaranteed and If I was an Xbox gamer I would consider my investment in the Xbox ecosystem a good one. Diablo, Warcraft, Starcraft, COD, Halo, Gears, Forza, The Elder Scrolls, Doom all under the Xbox banner - that's pretty insane if you think about it.
In the end, I think it'll be good for the industry. Sony will now have to counter, and that means them at their very best, so you get peak Xbox and Playstation going head to head, which is GREAT for us.
If and when all the Call of Duty games get added to Game Pass, maybe for fun I'll play through all their campaigns in chronological order (the World War II ones first, then the cold war ones, then the modern warfare ones, and finally the future war stuff), rather than in release order. :)
You're not getting peak xbox. Peak xbox would be making compelling exclusives to compete with sony, not hide behind multiplat exclusives labelled as exclusive.
Your definition of "peak" is not everyone else's.
I own a PS5 my platform of choice getting certain 3rd party games is no longer a fait accompli so this affects millions of consumers since it becomes a case of either no longer having access to those titles that become exclusive or having to outlay more money on another console and the associated costs that come with that, sure those on the xbox side are happy and I'm sure that the sports fans cheering on their console attitude displayed by many would see the exact same response from Sony fans if it was Sony buying up large 3rd party publishers, but that doesn't change the fact that the buyout will result in less choice for PS gamers and the suck it up and step up your game attitude means very little in a situation where were talking 3rd party games.
"Gamers will probably have to buy into multiple ecosystems" how exactly is this any different than we are seeing now and have been since the dawn of consoles?.
Currently there is a lot of overlap between Xbox and PS (so generally the typical gamer will pick only one). With strong enough lineups (currently a PS gamer does not need to buy into Xbox and vice versa) they will feel compelled to. If Xbox finds a way to leverage that IP the average PS gamer will make a plan to buy into that ecosystem. At this point its way more of a luxury than a necessity. Likewise if Sony goes for other major franchises.
This makes sense in some ways. However, it seems to me that costly hardware will not be necessary much longer, and streaming will make the cost of entry into each ecosystem much lower. So I think it's probably a wash for gamers, in the long run.
Yeah I agree streaming does resolve the hardware issue - but I feel for certain games especially competitive multiplayer games I don't see it ever becoming the preferred way to play. Unless there's a major breakthrough in the future.
What a great day for gamers!
Expected L from the FTC, now back to the UK we go where it sounds like MS and the CMA are going to settle things.
Nobody should be surprised by this. The FTC did terrible in court.
That was quick, Oh well I guess I can upgrade from the Xbox one to Xbox Series X with the $8,000 I just made in Ativision stock.
Congrats on the gains!
FTC need a hard look at themselves. You never argue like fanboys to protect a market leader.
Youtube's going to be fun today...
Was expecting this to drag out longer...
Why? They agreed on a time line with the judge from the start. No reason for this to drag longer or do you mean the whole acquisition saga?
I did not know there was a time line. I confess, I've only been reading mostly headlines during this whole acquisition saga.
Cool, means they probably can't buy anyone else. Tired of this shit, billions spent with no new studios, jobs or games. Just making rich people richer.
Looking better and better for the CMA by the day. ;-)
This breaking news. CMA is already caving.
CMA: "We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our Final Report. In order to be able to prioritise work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of litigation in the UK would be in the public interest and all parties have made a joint submission to the Competition Appeal Tribunal to this effect."
What if effect if anything does this have on the UK stuff?
MS could close the deal on Friday if they wanted to, and just pay the fines the UK will put on them.
But MS may just let CAT sort out the CMA though as they're already very publicly pissed off at the CMA lol. Which will be in 2-3 months IIRC. So there still may be a waiting game.
Either way, the UK is all alone now. So I wouldn't be surprised if they just drop everything. They thought they had EU support. They didn't. They had USA support and now they don't.
At no point did I waver in my belief that this was going through. Even when things looked the most dire, and some of the people hoping for the acquisition to go through feared it might not, my comments here on VGChartz were consistent that I believed it was still going through. Anyone who doesn't believe me, check my comment history. Microsoft was clearly willing to make almost any concession necessary to get this deal done, and to invest whatever legal and regulatory effort required, so it was clear to me that this was therefore all but certain to happen.
If I'd had the money to do so, I would have been buying Activision stock like crazy. Sadly, I didn't have any spare cash. :P
A merger can generally proceed even under an ongoing review process with a "Hold separate agreement" which MS intends to do anyway. So we may see MS complete the merger and if an unfavorable outcome comes out of the CAT appeal they'll have to undo the merger/ pay a substantial fine or leave the UK entirely.
EDIT: Also, now that the CMA is the sole opponent to the deal, it might put additional pressure on them to agree out of court with MS for a resolution.
The result could've been different if FTC actually knew what they were doing, but they were really poor. I still think Microsoft acquiring Activision Blizzard is a little too much. Microsoft is already a humongous company and it's only going to get bigger. It's not like their presence is small in the gaming market either. They already hold the majority of PC operating systems and biggest business cloud services. If they become industry leaders in the gaming market as well, nobody can really stop GAFAM in the technology space.
I've never understood what the argument of PC operating systems market have to do with the PC gaming market when it comes to this deal. Steam is the monopoly in PC gaming. MS doesn't see a penny from them. Epic Games operates the Epic Games Store and manages by far the biggest gaming engine in the market with Unreal Engine. MS doesn't see a penny from them.
As far as PC gaming market goes, MS is 7th. Battle.net isn't going to make a dent in that either. So many comparisons are made of MS overall that are not mutually exclusive with the comparisons that are made.
Well it doesn't have to do anything with the gaming market, I'm just saying they already have a big revenue stream without needing the gaming market. Simply more people buying a PC is a win for Microsoft. As for the connection with games, more people buying gaming PCs means more profit for Microsoft.
Microsoft may not directly profit from game sales but there's a lot of games that only support windows. A gaming enthusiast will probably buy a license for windows to be able to play the games they want to play or use the software they want to use. That's why Apple's MacOS sucks for gaming.
You spoke about Microsoft getting more revenue from people buying gaming PCs. Not always true, many serious gamers build their own PCs and they relatively rarely purchase a copy of Windows (since there are ays to pirate it, or to just live with a trial copy in perpetuity, or they retired an old PC and moved their Windows product key over to the new PC).
You made comments that seem to rest heavily on the idea that Windows on gaming PCs is a significant revenue stream for Microsoft, and I don't believe that to be true.
Idk how you got it twisted, but that wasn't really my point. Not only did you miss my point, I also think your statement is quite naive. Windows alone earns Microsoft more than 20 billion for the past 5 years, 24.8b for 2022. That's basically the same amount Sony generates from video games. Oh did I mention Windows isn't even 15% of the whole revenue Microsoft earns? It's also growing every year so where did you get your thought process from.
Anyways, my point was that Microsoft is already one of the biggest company in the world, and they already generate tons of revenue from gaming. Might be lower than Sony, Tencent, Apple on average, but still higher than Nintendo. That should be plenty, but apparently they want to be at the top of the industry despite already having multiple segments earning them tons of money. Not only that, they are trying to purchase their way to the top. Do you understand what I'm trying to convey now?
"...it's only going to get bigger. It's not like their presence is small in the gaming market either. They already hold the majority of PC operating systems..."
"I'm just saying they already have a big revenue stream without needing the gaming market. Simply more people buying a PC is a win for Microsoft. As for the connection with games, more people buying gaming PCs means more profit for Microsoft.
Microsoft may not directly profit from game sales but there's a lot of games that only support windows. A gaming enthusiast will probably buy a license for windows to be able to play the games they want to play or use the software they want to use. "
These were the comments you made that suggested to me you were valuing Microsoft's Windows business more than they value it themselves, given the way they account for it on their financial statements.
I'm not naive. I understand Microsoft is a mega corp. But Nintendo dominates handhelds, Steam dominates PC gaming, Apple dominates mobile gaming revenue, Android dominates mobile gaming from a units/participation point of view, and Sony dominated console gaming. Microsoft is an also-ran in every gaming category. This transaction is unlikely to change that.
Lol I love how you conveniently took out the "cloud service" part. Also did you not notice my second comment was a reply to @gtotheunit91's comment? He was asking about the relation with PC operating system and PC gaming market so I simply answered, while making it clear I was originally talking about how Microsoft has plenty of revenue streams (PC operating system being one of it). Cmon man simple comprehension skills smh.
"I'm not naive. I understand Microsoft is a mega corp."
Again, that wasn't what I was referring to you being naive. I'm saying you're naive if you think Windows isn't a significant revenue stream and that Windows revenue is declining year after year.
The difference between all the other companies you mentioned and Microsoft in this case is that Microsoft is letting money do the work despite already having a big gaming division that isn't being used to it's full potential. That's not admirable at all. They are greedy mfs
My desire for this transaction to go through is primarily because ABK staff have had it so badly that it made the regular news (not the gaming news, the regular news) and lead to legal proceedings against ABK. Microsoft's HR team is very good in comparison and they need to clean house and change the culture at Activision and at Blizzard. There's a reason unions are on the side of this going through.
I mean, I don't disagree with you there, but it's not like Microsoft was the only saving grace. Plus if that is what's important, Ubisoft makes more sense. They are basically Activision Blizzard but cheaper and significantly needs more help. Ultimately, Microsoft is only looking for more ways to earn money, and Activision Blizzard does that better than Ubisoft. Rather than growing smaller studios, they chose to take the easy route.
The ruling is not necessarily the end of the process. The FTC can appeal the decision. It has also separately challenged the merger in a parallel process running in administrative court.
"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 the coming days we'll be announcing our next step to continue our fight to preserve competition and protect consumers."
They certainly could, but they couldn't even get past the minimum barrier for the actual trial in August and every FTC judge that has looked at this case in one way or another, has tossed it out. Including that "gamers suit" So even if the FTC does appeal, who knows what kind of additional case they can make. Because if the trial was anything go by, they wasted over a year of discovery.
It's definitely not the end of the process, but Microsoft seems hell-bent on "closing over" the deal. Despite the risk that if they ultimately lose they'd have to un-do the deal.
Administrative Court doesn't have any force under law, does it? Only actual court, from what I understand.
My understanding is that this is correct as well based on what I've read from other lawyers. The FTC's Administrative Court has absolutely no power, only a Federal Court has the power to force Microsoft to divest or stop a merger.
The FTC's Administrative Court is just delay tactics. They can make a judgement on the case, they can say "this deal shouldn't be allowed" but ultimately they cannot block the deal by law.
They can also say "this is a bad case and the FTC shouldn't go through with it" but the FTC can even ignore that and still go ahead with taking it to a Federal Court after the judgement of the Administrative Court.
So basically, if FTC wants it blocked, they have no option but to take it to a Federal Court. They tried to beat Microsoft in a Federal Court just now and have lost and this was for a Preliminary Injunction (a temporary block). The barrier for a Permanent Injunction (which would come after FTC's Administrative Court) is a lot higher.
So they could appeal but honestly their chances of winning anything now are next to 0%
Amusingly to me, Michael Pachter has been entirely vindicated. He not only consistently said throughout the process that he was confident this was going through, he even correctly predicted that a small divestiture was likely to be how the CMA concerns would ultimately be settled.
This is the end :) Winning the PI is usually way easier than the actual case and they did not even managed to do that. This is over, just get over it.
Hopefully the FTC sees further embarrassment in appealing and/or taking it to trial, and does exactly as you suggest.
Of course the corrupt FTC lost. Apart from the facts of the case, the FTC & CMA have abused their power, to lie endlessly about a legitimate deal, in order to rig the outcome, to also be uncompetitive & anti-consumer, by favouring a dominant market leader, & wasting millions of public money.....
It's endless confirmed corruption.
FBI is guilty of countless crimes. Your trust in them ignores all their crimes and corruption. Ask MLK family what they thing of the FBI, or the Durham report which confirms the FBI corruption.
Denying corruption to place faith in an even more criminally corrupt institution is embarrassing
Now you’re bringing up events from about events from 50 years ago?
At least try to make a coherent argument. Currently your argument amounts to ‘I don’t like this therefore its corrupt, but nothing will be done about because everywhere else is corrupt as well’.
It comes across a moaning for the sake of it because you have ingrained distrust of all government organisations. There’s also the oddity of you seeing corruption everywhere by not in a mega-corporation like Microsoft.
But if you don’t trust the FBI or SFO, then surely you can find somewhere else to take your mountain of evidence, right? But no, you won’t because you don’t anything beyond unsubstantiated rants.
