Federal Judge Refuses To Block Obvious Monopoly Play

Microsoft won a huge victory in federal court this week when a judge ruled that the company is allowed to move forward with its takeover of Activision Blizzard, a major video game production company.

U.S. regulators were looking to block the $69 billion purchase, saying that it would hurt competition in the marketplace.

But, in her ruling this week, Jacqueline Scott Corley, the U.S. district judge overseeing the case, said the merger deserved to be scrutinized, saying it could end up being the largest merger in the tech industry’s history. 

However, she said federal regulators never showed how the merger would result in serious harm being caused. She additionally wrote that the regulators likely wouldn’t prevail in their case if it were to go to a full-blown trial.

As Corley wrote of the Federal Trade Commission, which enforces all antitrust laws in the country:

“[The FTC] has not raised serious questions regarding whether the proposed merger is likely to substantially lessen competition.”

She was referring to competition both between consoles for video games or for the growing monthly subscription and cloud-based gaming markets.

This ruling didn’t come as a surprise to law experts who had been following the case, as Microsoft’s lawyers seemingly earned the upper hand during a court hearing in San Francisco that lasted five days and ended late in June. 

Those hearings featured the testimony of two major executives involved in the proposed merger – Bobby Kotich, the long-time CEO of Activision Blizzard, and Satya Nadella, the CEO of Microsoft. Both of them said they would keep Call of Duty – perhaps Activision’s top-ranked game – available to everyone who plays the game on a console.

That’s pertinent to the case, as there were many concerns about the potential that Microsoft would make Call of Duty an exclusive title for its Xbox console as a way to stifle competition from other console makers – in particular the PlayStation console, which is produced by Sony.

Following the judge’s ruling on Tuesday, Kotick issued a written statement that said:

“Our merger will benefit consumers and workers. It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly-growing industry.”

The FTC was requesting that the judge issue an injunction in the case that would’ve temporarily blocked the deal from closing before an in-house FTC judge had the chance to review it at a scheduled trial in August.

The companies, though, claimed that a delay for that long would in essence force both sides to abandon the agreement that they signed almost a year-and-a-half ago now. As part of that agreement, Microsoft promised they would pay a breakup fee of $3 billion to Activision if the deal didn’t close as of July 18 of this year.

In a prepared statement released after the ruling, Douglas Farrar, a spokesperson for the FTC, didn’t say whether the agency would appeal this ruling. He did say, however:

“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services and consoles. In the coming days, we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”