FTC pulls emergency brake on Microsoft's marriage to Activision Blizzard
Agency concerned the pair are planning to combine before it's able to make a decision whether to allow it
Updated Moving quickly to avoid what it worries could be a surprise merger finalization announcement, the US Federal Trade Commission has sought – and won* – a temporary restraining order to prevent Microsoft from completing its $69 billion acquisition of video game giant Activision Blizzard.
In a filing [PDF] yesterday in the US District Court for the Northern District of California, the FTC said it was seeking to maintain the status quo while it completes its administrative proceedings to decide whether to formally bar Microsoft's merger plans.
The FTC said it was only making the request because it was anxious Microsoft intended to close the merger ahead of the original July 18 drop dead date, after which Microsoft and Activision would need to renegotiate or walk away – an expensive prospect regardless of the decision.
"Both a temporary restraining order and a preliminary injunction are necessary because Microsoft and Activision have represented that they may consummate the proposed acquisition at any time … without any further notice to the Commision," the FTC said in its complaint. The FTC believes Microsoft and Activision could be planning to act as soon as this Thursday, June 15, and asked the court to make its decision before then.
The FTC's arguments for barring the merger in its emergency injunction request are largely the same that they have been since the whole fight kicked off, namely that Microsoft and Activision "cannot show cognizable, merger-specific efficiencies that would offset the reasonably probable and substantial competitive harm resulting from the acquisition."
In other words, Microsoft can't prove it won't do all the things the FTC is concerned it'll do if they're allowed to merge, like restrict access to Activision or Blizzard titles, downgrade streaming quality and other anti-competitive behavior. While the arguments are the same, the FTC does show a bit of its hand in making the emergency injunction request.
"In deciding whether to grant [this] relief, the Court must balance the likelihood of the Commission's ultimate success," the FTC said in its filing. So will it succeed? The Commission's lawyers think so.
"The Commission is likely to succeed in proving that the effect of the Proposed Acquisition may be substantially to lessen competition or tend to create a monopoly… and that the Merger Agreement and Proposed Acquisition constitute unfair methods of competition," the FTC said.
Ergo, "preliminary relief is warranted and necessary," the FTC concludes, because without it Microsoft may simply go ahead with the merger before the FTC makes its final decision. If the pair had already merged and the FTC decided to block the move, "reestablishing the status quo would be difficult, if not impossible."
It also calls out Microsoft for previous dealings with games company acquisitions. The filing claims:
Microsoft's past conduct provides a preview of the combined firm's likely plans if it consummates the Proposed Acquisition, despite any assurances the company may offer regarding its plans. In March 2021, Microsoft acquired ZeniMax Media Inc, the parent company of the well-known game developer and publisher Bethesda Softworks LLC. Microsoft assured the European Commission during its antitrust review of the ZeniMax purchase that Microsoft would not have the incentive to withhold ZeniMax titles from rival consoles. But, shortly after the EC cleared the transaction, Microsoft made public its decision to make several of the newly acquired ZeniMax titles, including Starfield, Redfall, and Elder Scrolls VI, Microsoft exclusives.
Microsoft's President Brad Smith told The Register in a statement that Microsoft was looking forward to the opportunity to defend the deal in federal court. "We believe accelerating the legal process in the US will ultimately bring more choice and competition to the market."
Activision Blizzard CEO Bobby Kotick sent an email to employees Monday saying much the same, and spinning the FTC's move as "a positive development" because the request, filed in a federal district court, would take the case into the public eye.
- Microsoft appeals UK's block on Activision deal
- China becomes the 37th country to approve Microsoft's Activision buyout
- Boss fight cleared: Europe approves Microsoft's Activision takeover
- Microsoft cries foul over UK gaming deal blocker but it's hard to feel sorry for them
"Our excellent legal team has been preparing for this move for more than a year, and we're ready to present our case to a federal judge who can evaluate the transaction on the merits," Kotick said. "The facts are on our side."
Things are looking grim
There was never really a time where Microsoft's $69 billion attempt to buy Activision Blizzard seemed like a surety, but things haven't really been this grim for some time.
The corporate couple have long argued that their nuptials would be a boon to gamers, but the FTC took umbrage with that claim and made moves to block the merger soon after the companies announced the plan.
Like star-crossed Shakespearean lovers, Microsoft and Acti-Bliz sought and found their Mantua in the European Union, which took well to Smith's tour of the continent earlier this year to plead Microsoft's case, and months later approved the deal.
China has also approved the merger, as have authorities in Japan, South Korea, Brazil and several other nations.
The UK didn't, though, and pre-empted the EU's decision with its own announcement blocking Microsoft's move on similar grounds to those given by US officials. Microsoft is appealing against the Competition and Markets Authority's final decision: a 10-year ban on the pair merging.
If the FTC is successful in its emergency attempt to bar the move, its administrative case against the merger would be able to proceed as normal. Its next scheduled hearing is on August 2, weeks after the merger's July 18 deadline will have come and gone. ®
Updated to add on June 14:
* US District Judge Edward J Davila signed the temporary restraining order late yesterday, saying it was "necessary to maintain the status quo while the complaint is pending (and) preserve this court's ability to order effective relief in the event it determines a preliminary injunction is warranted and preserve the FTC's ability to obtain an effective permanent remedy in the event that it prevails in its pending administrative proceeding."
Before Davila put pen to paper, Microsoft could have moved ahead to close the Activision deal as soon as Friday.