FTC puts internal lawsuit over Microsoft-Activision deal on hold | engaged

The Federal Trade Commission has formally suspended its administrative litigation over Microsoft’s pending acquisition of Activision Blizzard. The move, which was first reported BloombergAllows the agency and the companies to negotiate an astonishing $68.7 billion merger settlement.

The FTC’s decision to block the deal is another major win for Microsoft and Activision as they push to close the deal. The agency filed a lawsuit in December to block the deal, and a hearing on the case was set for August 2. Last week it lost a legal bid to prevent the companies from merging before administrative litigation begins in early August. The FTC has appealed the damages in court.

Jacqueline Scott Corley wrote in a statement last week, “The FTC has not demonstrated that it is likely to succeed in its assertions that the combined company is likely to remove Call of Duty from Sony PlayStation, or that Activision’s ownership of the content would significantly reduce competition in the subscription and cloud gaming markets for video game libraries.” Microsoft has signed a deal with Sony to keep Call of Duty on PlayStation for 10 years if the merger goes through.

In a motion filed Tuesday, Microsoft and Activision urged the FTC to withdraw their case. Under FTC rules, the agency must withdraw its case after the companies filed a request that a preliminary injunction to block the merger was denied. Per BloombergMicrosoft and Activision may now try to persuade the FTC to accept a settlement that would address the agency’s concerns about the deal’s effect on competition in the games industry. Alternatively, they could persuade the FTC to abandon its opposition to the merger altogether.

The FTC has the option of continuing its administrative process even after the merger is complete. However, it is rare for an agency to continue with an internal case after losing a federal lawsuit.

The initial deadline to close the acquisition was Tuesday, although Microsoft and Activision extended their merger agreement to October. 18 to give them “additional time to resolve remaining regulatory concerns”. They agreed that Microsoft would receive a hefty termination fee of $4.5 billion if the deal fell through, although both parties remained committed to completion.

Microsoft and Activision are yet to receive approval from the UK regulator to close the deal without resorting to workarounds to continue doing business in the country. The Competition and Markets Authority initially blocked the merger in April, but last week signaled a willingness to amicably resolve its concerns about the deal’s potential impact on the cloud gaming market.

Microsoft is about to submit an updated merger proposal to the CMA. The regulator will make a decision before August 29, but aims to do so as soon as possible. At a hearing this week, a CMA lawyer said both the regulator and Microsoft are confident the company will be able to address its concerns. It’s another sign that the biggest merger in gaming history is likely to be completed in the coming weeks.