A judge has rejected the Federal Trade Commission’s request for a preliminary injunction to prevent Microsoft from buying Activision Blizzard for $68.7 billion. Both Microsoft and Activision said they’d abandon the blockbuster merger if Judge Jacqueline Scott Corley granted the injunction.
“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.” Activision Blizzard CEO Bobby Kotick said in a statement.
“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.” Microsoft president and vice chair Brad Smith said. “As we’ve demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory concerns.”
The FTC sued to block the merger last December and a hearing in its administrative proceeding is set for August 2nd. However, the merger agreement has a deadline of July 18th, so Microsoft and Activision Blizzard are eager to close the deal by then. Otherwise, Microsoft will be on the hook for a $3 billion breakup fee to Activision unless the two sides are able to renegotiate terms. As such, they wanted the court to review the FTC’s injunction request swiftly.
The companies claimed that, if the preliminary injunction were granted, it would “effectively block the transaction because the FTC’s process is ‘glacial’ and one no substantial business transaction could ever survive.”
Along with the FTC, the UK’s Competition and Markets Authority is the only other national antitrust regulator that has formally challenged the Activision takeover. Microsoft and Activision are appealing the CMA’s decision to block the merger over cloud gaming concerns. The appeal process that can take several months. There are suggestions that the companies will lock in the deal regardless.
That prompted the FTC to request an injunction in the hopes of being able to “assess the legality of the proposed acquisition” in next month’s hearing before the deal closes. “Press reports began circulating suggesting that defendants were seriously contemplating closing the proposed acquisition despite the pending administrative litigation and the CMA orders,” the FTC’s request read.
Corley issued a ruling following a five-day trial in June that saw all manner of juicy gaming industry secrets and emails between industry leaders laid bare for all to see. For one thing, we learned that MachineGames’ Indiana Jones project was originally going to be a multiplatform game, but after Microsoft bought ZeniMax, it made the title an Xbox console exclusive.
Microsoft and Activision Blizzard aren’t entirely in the clear. Regulators in dozens of countries have cleared the deal, including in the European Union. However, the UK antitrust authority presented a significant road block (an appeal process will start with a hearing later this month). The FTC’s administrative trial is pending and it can still appeal Corley’s decision. However, the companies have cleared a major hurdle by winning this particular battle.
A temporary restraining order stipulated that Microsoft and Activision are unable to close the merger “until after 11:59PM Pacific Time on the fifth business day after the court rules on the FTC’s request for a preliminary injunction or a date set by the court, whichever is later.” Still, they just about have time to seal the deal before their deadline.
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