Call of Duty on Switch is still not guaranteed as the FTC appeals the ruling

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Image: Activision Blizzard

To update [Thu 13th Jul, 2023 10:00 BST]: If you thought the conflict over Microsoft’s acquisition of Activision Blizzard was over, think again. Earlier this week, a California judge ruled in favor of Microsoft, denying the Federal Trade Commission’s request for an injunction against the deal. The FTC has now appealed this decision.

The news was shared by the managing editor of The Verge @tomwarrennoting that the regulator’s argument behind the appeal has not yet been shared, and likely will remain so until it is submitted to the Ninth Circuit Court of Appeals — which may then be able to issue “an emergency stay extending the existing temporary restriction” order ‘ currently expires on July 14.

Microsoft President Brad Smith tweeted a statement about the appeal, citing the company’s disappointment that “the FTC continues to pursue a proven weak case”:

Of course, there’s no guarantee the appeal will be accepted before the July 18 contract deadline, meaning Microsoft may still be able to close the acquisition early next week. Just last night, Nasdaq announced that Activision-Blizzard would be removed from the Nasdaq 100 ESG Index ahead of market opening on July 17, signaling that the company will no longer be a standalone entity. It seems Microsoft’s preparations are in full swing.

This could increase pressure on Microsoft to reach an agreement with the UK’s Competition and Markets Authority, which still opposes the deal.

Original article [Tue 11th Jul, 2023 17:35 BST]: After five days of hearing evidence, a California judge today denied the Federal Trade Commission’s request for an injunction against Microsoft’s acquisition of Activision Blizzard. In short, the deal can now be implemented in the US.

We’re not across the finish line yet – the deal is still blocked in the UK, remember – but today’s result means Microsoft can get the acquisition rolling in the US and start honoring the legally binding commitment call of Duty on Nintendo consoles.

The court today filed a 53-page document in which Judge Corley agrees with all of Microsoft’s claims, including “an agreement with Nintendo to bring Call of Duty to the Switch.” Part of this conclusion can be found below:

Microsoft’s acquisition of Activision is considered the largest in technology history. It deserves a closer look. That scrutiny has paid off: Microsoft has committed in writing, publicly, and in court to keep Call of Duty on PlayStation on par with Xbox for 10 years. An agreement has been reached with Nintendo to bring Call of Duty to the Switch. Also, multiple deals were struck to bring Activision’s content to multiple cloud gaming services for the first time.

The jurisdiction of the court is limited in this case. It is to determine whether, notwithstanding these current circumstances, the merger should be halted — perhaps even terminated — pending FTC administrative action. For the reasons set out above, the Court concludes that the FTC has not shown any likelihood that it will prevail in its contention that this particular vertical concentration could significantly impede competition in this specific industry. On the contrary, the evidence so far suggests consumers are having more access to Call of Duty and other Activision content. The request for an injunction is therefore DENIED.

Following the ruling, Microsoft President Brad Smith released a statement on Twitterto express the company’s gratitude to the court:

The outcome of the court hearing means Microsoft now has until July 18 to finalize the deal with Activision. However, the deal is still blocked in the UK and will remain so until Microsoft can appeal the decision to the Competition and Markets Authority on July 28.

Either the deal will be completed across the UK, or the CMA will have to be ready to negotiate after both the US and EU agree to the deal. It would not surprise us if the July 18 deadline were extended to allow the CMA hearing to take place first.

Smith again took to Twitter to offer a different statement on the CMA issue. He noted that Microsoft still disagrees with the CMA’s stance, although the company is currently “considering how the transaction might be modified to address these concerns”:

So it’s not a done deal yet, but it certainly seems things are changing in Microsoft’s favour.

Do you think the CMA will back down after the FTC’s motion is denied? Can the debate really go on much longer? Let us know your thoughts in the comments.

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