FTC Pauses Internal Probe of Microsoft-Activision Merger

The Federal Trade Commission has officially paused its administrative investigation of Microsoft’s prospective purchase of Activision Blizzard. As initially disclosed by Bloomberg, this suspension allows both parties and the FTC to negotiate a settlement for the staggering $68.7 billion merger.

This decision by the FTC marks another significant win for Microsoft and Activision as they strive to finalize the deal. The agency had previously sued to block the transaction in December, with an evidentiary hearing slated for August 2nd. However, it suffered a legal setback last week in its efforts to halt the merger ahead of the scheduled administrative trial in early August. An appeal against this legal defeat has been lodged by the FTC.

“Failure of the FTC to demonstrate the likelihood of its claim that the consolidated entity would potentially withdraw Call of Duty from Sony PlayStation, or that its ownership of Activision content would significantly impact competition in the video game library subscription and cloud gaming sectors,” was mentioned by Jacqueline Scott Corley in her ruling last week. Following this, Microsoft has inked a 10-year agreement with Sony to ensure Call of Duty remains on PlayStation, conditional upon the merger’s success.

Microsoft and Activision, in a motion filed on Tuesday, encouraged the FTC to dismiss its case. As per FTC regulations, upon this request by the companies, the agency is required to drop its case, given that it was refused a preliminary injunction to prevent the merger. As per Bloomberg, Microsoft and Activision are now at liberty to try and convince the FTC to agree to solutions that will address the agency’s reservations about the merger’s effect on gaming industry competition. Alternatively, they could persuade the FTC to completely relinquish its opposition to the deal.

Post-merger, the FTC retains the right to resume its internal investigation. Yet, it’s infrequent for the agency to continue with an in-house case after a federal court defeat.

Although the initial deadline for the merger was Tuesday, Microsoft and Activision have extended their merger agreement to October 18th to provide “additional time to resolve remaining regulatory concerns.” They agreed Microsoft would bear a potential breakup fee up to $4.5 billion if the deal collapses, but both parties are determined to finalize the matter.

To finalize the merger without resorting to loopholes to maintain their UK operations, Microsoft and Activision still need approval from a UK regulator. The Competition and Markets Authority initially halted the merger in April, but over the past week, it has indicated readiness to amicably address its worries over the deal’s effect on the cloud gaming market.

Microsoft is ready to submit a revised merger proposal to the CMA. The regulator intends to make a decision by August 29th, although it aims to do so sooner if possible. At a hearing this week, a CMA lawyer expressed confidence that Microsoft would successfully resolve the regulator’s concerns. This is yet another indication that the largest merger in gaming history is likely to be sealed in the upcoming weeks.

Frequently Asked Questions (FAQs) about Microsoft-Activision Merger

More about Microsoft-Activision Merger

• Microsoft’s announcement of the acquisition
• Federal Trade Commission’s review process
• Bloomberg’s report on the paused FTC trial
• The Competition and Markets Authority’s take on the merger
• Details about the Sony and Microsoft’s Call of Duty deal