Tuesday’s ruling follows a five-day hearing before US District Judge Jacqueline Scott Corley in late June in which the FTC sought to temporarily delay the settlement pending a full trial in its administrative tribunal. Only a federal court can block a deal.
« The FTC has not shown that it is likely to succeed on its assertion that the combined company will likely withdraw Call of Duty from Sony PlayStation, or that its ownership of Activision’s content will substantially reduce competition in the video game library subscription markets and of cloud gaming,” Corley wrote in the heavily redacted, 53-page ruling.
Corley telegraphed his decision at the hearing. « Essentially, you won and you got what you wanted and you forced them to go out and make these deals, » Corley told FTC attorneys in court. He was referring to deals Microsoft has made with a number of video game companies, including Nintendo and Nvidia, in which it promised equal access to Activision’s hit game Call of Duty.
Microsoft’s main video game rival and main opponent of the deal, Sony, has so far refused to agree to such a deal, saying it is concerned that Microsoft will limit or reduce access to that game and others both on consoles and in the emerging industry. cloud gaming. .
« And maybe it also helped that at least they seemed to be less optimistic about the cloud, » Corley said in court, referring to the Microsoft executive’s testimony at the hearing. “[B]but they’ve come out and signed these deals now with Nvidia to give them Activision content. How is it not good for consumers?
Activision CEO Bobby Kotick said on Tuesday, “Our merger will benefit consumers and workers. It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry. »
« We are grateful today for this swift and comprehensive decision and hope other jurisdictions continue to work towards a timely resolution, » said Microsoft President Brad Smith. “As we have demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory issues.”
The FTC did not immediately respond to requests for comment
The FTC can appeal to the US Court of Appeals for the Ninth Circuit. The companies currently have a contractual deadline of July 18 to finalize their deal, ahead of their UK appeal.
The FTC has until late Friday to get a stay of the ruling from the Ninth Circuit. Prior to the hearing, Corley blocked the companies from closing pending the release of his ruling.
The companies have been discussing closing the deal « around » the UK, according to a person familiar with their thought process, which was first reported by Bloomberg. While it’s unclear what exactly this entails, it could involve maintaining the two companies’ separate UK operations while integrating the rest of their businesses around the world.
The American Economic Liberties Project, a progressive advocate of aggressive antitrust enforcement, has urged the FTC to appeal. « When emails from Microsoft say they are building a ‘moat’ and trying to ‘spend’ their competitors ‘out of business,’ that should be enough to pause the court, » said Lee Hepner, chief legal officer of the group. « The fact that Judge Corley’s son works for Microsoft taints the outcome at a time when judicial ethics are paramount for many. »
But the Communications Workers of America, which support the deal, applauded the ruling. « In regards to the impact on workers, the actions Microsoft is taking not only prevent harm, but represent a real shift in the empowerment workers will have in the gaming industry. »