U.S. appeals court has rejected federal regulators’ attempt to block Microsoft from finalizing its $68.7 billion deal to acquire video game maker Activision Blizzard. The ruling paves the way for the completion of what is set to be the largest acquisition in tech history. Following a legal battle centred around concerns of potential competition issues.
A three-judge panel on the 9th U.S. Circuit Court of Appeals issued a brief ruling. Determining that there were no grounds to issue an order that would have hindered Microsoft from proceeding with the acquisition of Activision Blizzard, known for producing popular video games like Call of Duty.
The software giant based in Redmond, Washington, is now racing against time, facing a possible $3 billion termination fee if the deal is not finalized by Tuesday.
Microsoft President Brad Smith expressed his satisfaction with the court’s decision, stating, “This brings us another step closer to the finish line in this marathon of global regulatory reviews.”
The U.S. Federal Trade Commission (FTC) had filed the appeal as a final attempt to halt the merger, following a previous ruling by a federal judge earlier in the week that rejected the agency’s attempt to block the deal. The FTC sought an injunction to prevent Microsoft from moving forward with the acquisition as early as the upcoming weekend.
The FTC refrained from providing immediate comment on the recent court ruling.
In her ruling published on Tuesday, U.S. District Judge Jacqueline Scott Corley stated that the FTC had failed to demonstrate substantial harm resulting from the merger. She specifically focused on Microsoft’s commitments and economic incentives to ensure that Call of Duty, a popular game title, remains available on rival gaming systems such as Sony’s PlayStation and Nintendo’s Switch, rather than exclusively on Microsoft’s own Xbox platform.
Challenging Corley’s decision, the FTC argued that she had made “fundamental errors.”
The FTC emphasized that the case extended beyond a single video game and console hardware, asserting that it held implications for the future of the gaming industry. It contended that the outcome would determine how upcoming gamers would play and whether subscription and cloud markets would become concentrated, closed environments or evolve into open and competitive landscapes.
The case has presented a significant test for the FTC’s intensified scrutiny of business practices in the technology industry under the leadership of chairperson Lina Khan, who assumed the role in 2021 under President Joe Biden’s administration. Established legal doctrine has generally favoured mergers between companies that do not directly compete with one another.