The U.S. Federal Trade Commission has decided to appeal the federal judge’s ruling allowing Microsoft to go ahead with the $69 billion deal for the acquisition of Activision Blizzard, Reuters news report said.
This legal battle highlights the complexities surrounding antitrust concerns and the power dynamics within the video game market.
The FTC’s initial argument against the merger was that it would harm consumers by granting Microsoft exclusive access to popular games like “Call of Duty,” thereby limiting competition. However, Judge Jacqueline Scott Corley rejected this argument, stating that the FTC failed to demonstrate that the merger would “probably substantially lessen competition.” Instead, she suggested that the FTC needed to prove that the deal “may” harm competition, a lower burden of proof.
Legal experts have debated the appropriateness of the standard set by Judge Corley. Some argue that she may have erred in her interpretation of the U.S. antitrust law, which requires the FTC to show that the proposed deal “may” harm competition. Others contend that appeals courts typically defer to judges on matters of fact, making it challenging for the FTC to overturn the ruling.
Microsoft’s $69 billion acquisition of Activision Blizzard is not only its largest-ever deal but also the biggest in the history of the video game industry. This acquisition would consolidate Microsoft’s position in the gaming market and potentially give it a significant advantage over competitors like Sony and Nintendo. The FTC’s concerns about Microsoft using its ownership of Activision games to exclude rival console makers from accessing popular titles underscore the potential anticompetitive implications of the deal.
To address some of these concerns, Microsoft has agreed to license “Call of Duty” to rivals, including a 10-year contract with Nintendo. This move is aimed at mitigating the perception that Microsoft would use its newfound control over Activision’s content to monopolize the market. Additionally, the UK’s Competition and Markets Authority (CMA) has expressed openness to considering Microsoft’s proposals to resolve antitrust concerns, indicating that a resolution may be possible in the UK.
The significance of this case extends beyond the immediate consequences for Microsoft and Activision Blizzard. It raises broader questions about the future of the gaming industry and the regulatory landscape surrounding mergers and acquisitions. With the gaming market expected to grow substantially in the coming years, reaching an estimated value of $321 billion, according to PwC, regulators are increasingly focused on ensuring fair competition and preventing anticompetitive practices.
The outcome of this appeal will have far-reaching implications for the gaming industry and how future mergers and acquisitions are evaluated. It will shape the balance of power among major players in the market and set a precedent for the level of proof required to block similar deals in the future. As the appeal proceeds to the Ninth Circuit Court of Appeals, the resolution of this case will be closely watched by industry participants, regulators, and legal experts alike.