Microsoft cleared a major hurdle in its planned $69 billion purchase of videogame maker Activision Blizzard on Tuesday, as a judge gave a thumbs-up to the proposed deal and dealt a blow to President Joe Biden’s antitrust efforts.
Activision shares were up 10% at $91.02 on Tuesday afternoon and Microsoft shares were marginally lower after U.S. District Judge Jacqueline Scott Corley in San Francisco rejected the administration’s contention that the deal would hurt consumers by giving Xbox game console-maker Microsoft exclusive access to games including the best-selling “Call of Duty.”
The U.S. and Britain have been the two countries opposed to what would be the largest deal ever in the videogame industry and Microsoft’s largest deal of any kind. Shortly after the U.S. judge’s order, Britain’s Competition and Markets Authority (CMA) said it was prepared to consider Microsoft’s proposals to resolve antitrust concerns in the UK, suggesting the two parties may come to a resolution.
Corley gave the U.S. Federal Trade Commission (FTC) until Friday to appeal the decision.
The FTC had argued that Microsoft would be able to use the Activision games to leave rival console makers like Nintendo and market-leader Sony Group out in the cold.
In her opinion, Corley disagreed.
“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,” she wrote.
Gaming market sales are expected to increase by 36% over the next four years to $321 billion, according to a PwC estimate.
Corley’s decision is a setback in the broader push by the Biden administration to cut costs for consumers that have also included negotiations to lower the cost of insulin medication and eliminate “junk fees” in airline tickets.
FTC spokesperson Douglas Farrar said the antitrust regulator was “disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles. In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”
Microsoft President Brad Smith said the company was grateful for the “quick and thorough” decision. He also tweeted that his focus would now be on considering how the transaction could be changed to address the CMA’s concerns.
“It does seem like the Microsoft and the CMA could work out a deal within the next couple of weeks,” said D.A. Davidson & Co analyst Franco Granda.
While much of the testimony in the recent trial focused on “Call of Duty,” Activision produces other bestsellers like “World of Warcraft,” “Diablo” and the mobile game “Candy Crush Saga.”
The FTC’s complaint had cited concerns about loss of competition in console gaming, as well as subscriptions and cloud gaming.
To address the agency’s concerns, Microsoft agreed to license “Call of Duty” to rivals, including a 10-year contract with Nintendo, contingent on the merger closing. During the five-day trial in June, Microsoft CEO Satya Nadella argued the company would have no incentive to shut out Sony’s PlayStation or other rivals in order to sell more Microsoft Xbox consoles.
