Microsoft achieved significant progress towards its acquisition of video game maker Activision Blizzard on Tuesday, as a U.S. judge approved the $69 billion deal and a British regulator indicated a potential reconsideration of its opposition. The announcement resulted in a 10% surge in Activision shares, marking a momentous development for Microsoft, as the United States and Britain were the primary countries objecting to the acquisition, which would be Microsoft’s largest deal to date and the most substantial transaction in the history of the video game industry. Microsoft shares also experienced a modest increase of 64 cents, reaching $332.47.
U.S. District Judge Jacqueline Scott Corley in San Francisco dismissed the Biden administration’s argument that the acquisition would harm consumers by granting Microsoft, the manufacturer of the Xbox game console, exclusive access to popular games such as the bestselling “Call of Duty.” Following the judge’s ruling, the Competition and Markets Authority (CMA) in the United Kingdom expressed its willingness to review Microsoft’s proposals to address antitrust concerns, suggesting the possibility of a resolution between the two parties. Joost Van Dreunen, a lecturer at New York University’s Stern School of Business, noted that the testimonies presented during the U.S. trial weakened the arguments put forth by the UK’s antitrust watchdog.
The U.S. Federal Trade Commission (FTC) contended that Microsoft’s ownership of Activision would allow the company to exclude rival console makers like Nintendo and industry leader Sony Group, posing a threat to competition. However, Judge Corley disagreed with this assertion, stating that the FTC had not demonstrated a likelihood of success in its claim that the combined entity would likely remove “Call of Duty” from the Sony PlayStation platform or substantially diminish competition in the video game library subscription and cloud gaming markets. The court granted the FTC until Friday to file an appeal against the decision. An FTC spokesperson expressed disappointment with the outcome and indicated that the regulator would announce its next steps to preserve competition and protect consumers.
The potential appeal by the FTC underscores the significance of the court ruling. The gaming market is projected to witness a 36% increase in sales over the next four years, reaching $321 billion, according to estimates by PwC. Judge Corley’s decision represents a setback in the broader efforts of the Biden administration to reduce costs for consumers, which include initiatives to lower the price of insulin medication and eliminate “junk fees” in airline tickets. Microsoft President Brad Smith expressed gratitude for the swift and thorough decision, noting that the focus now shifted to addressing the concerns raised by the CMA. Analysts anticipate that Microsoft and the CMA could reach a resolution in the coming weeks.
While much of the trial’s testimony revolved around “Call of Duty,” it is worth noting that Activision also produces other highly successful games such as “World of Warcraft,” “Diablo,” and the mobile game “Candy Crush Saga.” The FTC’s complaint highlighted concerns regarding potential competition loss in console gaming, subscriptions, and cloud gaming. In response to these concerns, Microsoft agreed to license “Call of Duty” to competitors, including a 10-year contract with Nintendo, contingent upon the completion of the merger. During the trial, Microsoft CEO Satya Nadella emphasized that the company had no incentive to exclude Sony’s PlayStation or other rivals in order to boost sales of Microsoft Xbox consoles.
Reporting by Diane Bartz in Washington, with additional contributions by David Shepardson, Jaspreet Singh, Aditya Soni, and Shivani Tanna; written by Chris Sanders; edited by Caitlin Webber, Matthew Lewis, David Gregorio, and Muralikumar Anantharaman.