Microsoft-Activision Merger Upheld by US Appeals Court (1)

Microsoft Corp.’s landmark acquisition of Activision Blizzard Inc. didn’t violate the antitrust laws, a US appeals court said in a ruling that will likely reshape how the Federal Trade Commission reviews deals involving rapidly evolving technology.

The 9th Circuit US Court of Appeals said a trial judge was correct in rejecting the FTC’s bid to block the $69 billion deal. Judge Jacqueline Scott Corley ruled in July 2023 that Microsoft’s plan to release Activision titles in the cloud adequately addressed the FTC’s antitrust concerns, a three-judge panel said. The deal closed in October 2023.

Spokespeople for Microsoft and the FTC declined to comment.

An administrative trial in the FTC’s in-house court was put on hold pending the outcome of the agency’s appeal. The Ninth Circuit ruling doesn’t immediately change that, but it’s likely that part of the case will be dismissed.

In the opinion written by Judge Daniel P. Collins, the Ninth Circuit found that the FTC failed to show the “likelihood of success on the merits as to any of its theories.”

The agency failed to show that Microsoft would have cut off rivals seeking access to Activision’s Call of Duty game or that it would have substantially lessened competition in the gaming subscription market, the appeals court said.

The panel also said the FTC didn’t make its case that the deal would have hurt competition in the cloud-streaming market, saying that the agency “failed to show that Activision Blizzard content would be available to this market in the absence of the merger.”

Whether Microsoft would make Activision titles exclusive to its platforms was the central theme of the FTC’s case. The appeals court noted that Microsoft has released exclusive games for its XBox console and Windows operating system, but said that is a feature across the industry.

“All major manufacturers have engaged in this practice,” Collins wrote, adding that the lower court found that Nintendo and Sony “both have significantly higher number of exclusive games on their platform than [Microsoft] does.”

The Long, Winding Road to a Microsoft-Activision Deal: QuickTake

(Updates with details from the ruling starting in fifth paragraph.)

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Josh Sisco in San Francisco at jsisco6@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Peter Blumberg, Elizabeth Wasserman

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