A U.S. appeals court on Friday denied federal regulators’ attempt to block Microsoft from finalizing its $68.7 billion acquisition of video game maker Activision Blizzard. The court ruling clears the way for the completion of the largest acquisition in tech history, ending a legal battle over concerns about competition.
In a brief ruling, a panel of three judges on the 9th U.S. Circuit Court of Appeals concluded that there were no grounds to prevent Microsoft from completing the deal, which has been in progress for nearly 18 months and involves the purchase of popular video game franchises like Call of Duty.
Microsoft, based in Redmond, Washington, could face a termination fee of $3 billion if the deal is not concluded by Tuesday.
“This brings us one step closer to the end of this lengthy process of global regulatory reviews,” said Microsoft President Brad Smith in a statement.
The appeal filed by the U.S. Federal Trade Commission (FTC) was a last-ditch effort by antitrust enforcers to stop the merger. However, another federal judge previously ruled against the agency’s attempt to block the deal. The FTC sought an injunction to prevent Microsoft from closing the deal as early as this weekend.
The FTC declined to comment on the ruling.
The earlier ruling by U.S. District Judge Jacqueline Scott Corley stated that the FTC had not demonstrated substantial harm resulting from the deal. Corley emphasized Microsoft’s commitments and economic incentives to make Call of Duty available on rival gaming systems like Sony’s PlayStation and Nintendo’s Switch.
In its appeal, the FTC argued that Corley made “fundamental errors.”
“This case goes beyond just a single video game and the console hardware to play it,” said the FTC. “It concerns the future of the gaming industry. At stake is how future gamers will play and whether subscription and cloud markets will become concentrated, closed environments or evolve into open, competitive landscapes.”
This case has posed a significant challenge for the FTC’s intensified scrutiny of the tech industry’s business practices under Chairperson Lina Khan, appointed by President Joe Biden in 2021. Traditionally, mergers between companies that do not directly compete have been favored by legal doctrine.
The FTC argued that Corley, herself a Biden nominee, applied the wrong legal standard by effectively requiring the agency’s attorneys to present their full case now instead of during the trial scheduled to begin in August before the FTC’s in-house judge.
Interestingly, it was the FTC that sought an urgent hearing on its request to block Microsoft and Activision Blizzard from hastily closing the deal, arguing that if the deal were to close now, it would be more difficult to reverse the merger if it was later found to violate antitrust laws.
In response to the appeal, Microsoft countered that it could easily divest Activision Blizzard later if necessary, and it has consistently defended the deal as beneficial for the gaming industry.
The deal still faces a hurdle in the United Kingdom, although it now appears closer to being overcome.
British antitrust regulators extended their deadline for issuing a final order on the proposed merger, allowing them to review Microsoft’s “detailed and complex submission” presenting its case. The Competition and Markets Authority initially rejected the deal due to concerns about competition in the rapidly growing cloud gaming market.
However, the U.K. watchdog seems to have softened its stance after Corley’s ruling thwarted the U.S. regulators’ efforts to block the deal.
The authority extended the original deadline by six weeks to August 29 in order to carefully consider Microsoft’s response, which outlines “material changes in circumstance and special reasons” why regulators should not reject the deal.
___
AP Technology Writer Michael Liedtke contributed to this story.