A federal judge has handed Microsoft a major victory by declining to block its looming $69 billion takeover of video game company Activision Blizzard. US District Judge Jacqueline Scott Corley said in a ruling that the Federal Trade Commission "has not shown a likelihood it will prevail on its claim this particular vertical merger ... may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content." Microsoft appeared to have the upper hand in a five-day San Francisco court hearing last month, reports the AP. The proceeding showcased testimony by Microsoft CEO Satya Nadella and longtime Activision Blizzard CEO Bobby Kotick, who both pledged to keep Activision's blockbuster game Call of Duty available to people who play it on consoles—particularly Sony's PlayStation—that compete with Microsoft's Xbox.
"Our merger will benefit consumers and workers. It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry," said Kotick in a written statement. Shares of Activision Blizzard Inc. jumped 5% on the ruling. The FTC, which enforces antitrust laws, had asked Corley to issue an injunction temporarily blocking Microsoft and Activision from closing the deal before the FTC's in-house judge can review it in an August trial. Both companies suggested that such a delay would effectively force them to abandon the takeover agreement they signed nearly 18 months ago. Microsoft has promised to pay Activision a $3 billion breakup fee if the deal doesn't close by July 18.
The case is an important test for the FTC's heightened scrutiny of the technology industry under Chair Lina Khan, who was installed by President Biden in 2021 because of her tough stance on what she sees as monopolistic behavior by tech giants such as Amazon, Google, and Facebook parent Meta. Another judge rebuffed the FTC's attempt earlier this year to stop Meta from taking over the virtual reality fitness company Within Unlimited. Corley, herself a Biden nominee, expressed skepticism about the FTC's case during the proceedings, particularly about the hypothetical harms caused if Microsoft were to remove Call of Duty from rival platforms or offer a subpar experience on competing consoles. "It all comes down again to Call of Duty," she said. "We're here because of Call of Duty."
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Near the close of the hearing, Corley said the FTC had already achieved a victory for consumers because of promises Microsoft made to some rivals as it sought to clear a path for the Activision deal to go through. Microsoft pledged that Call of Duty would appear on Nintendo's Switch console, Nvidia's cloud gaming service, and other platforms for at least a decade. "In many ways you won," Corley told the FTC's lead attorney, James Weingarten. "I don't think we won," Weingarten responded, saying there was no evidence that the "hastily agreed to" contracts would sufficiently protect the market. A number of other countries and the European Union have approved the Activision takeover, but it still faces opposition from the UK's Competition and Markets Authority. Canadian regulators are also investigating the transaction.
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