A US judge has given a thumbs-up to Microsoft’s $US69 billion ($103 billion) deal to buy video game maker Activision Blizzard, clearing another major hurdle in the company’s plan.
Key points:
- The Federal Trade Commission in the US says the deal could mean a loss of competition in console gaming
- Gaming market sales are expected to increase over the next four years to $US321 billion
- Activision produces Call of Duty, World of Warcraft, and Candy Crush Saga
A British regulator also suggested it could reconsider its opposition to the deal.
Activision shares surged 10 per cent on the day, as the US and Britain have been the two countries opposed to what would be Microsoft’s biggest deal ever and the largest transaction in the video game industry’s history.
Microsoft shares rose 64 US cents to $US332.47.
US District Judge Jacqueline Scott Corley in San Francisco rejected the administration’s contention that the deal would hurt consumers by giving Xbox game console maker Microsoft exclusive access to games including the best-selling Call of Duty.
Shortly after the US judge’s order, Britain’s Competition and Markets Authority (CMA) said it was prepared to consider Microsoft’s proposals to resolve antitrust concerns in the UK, suggesting the two parties may come to a resolution.
The US Federal Trade Commission (FTC) had argued that Microsoft would be able to use the Activision games to leave rival console makers like Nintendo and market-leader Sony Group out in the cold.
Ms Corley disagreed in her opinion.
“The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets,” she wrote.
The court gave the FTC until Friday local time to appeal the decision.
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Gaming market sales set to grow to $479 billion
“The various testimonies that have surfaced during the US trial all weaken the UK’s antitrust watchdog’s arguments,” said Joost Van Dreunen, a lecturer at New York University’s Stern School of Business.
Gaming market sales are expected to increase by 36 per cent over the next four years to $US321 billion ($479.92 billion), according to a PwC estimate.
Ms Corley’s decision is a setback in the broader push by the Biden administration to cut costs for consumers that have also included negotiations to lower the cost of insulin medication and eliminate “junk fees” in airline tickets.
“[We are] disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” FTC spokesperson Douglas Farrar said.
“In the coming days we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”
Microsoft president Brad Smith said the company was grateful for the “quick and thorough” decision.
He also tweeted that his focus would now be on considering how the transaction could be changed to address the CMA’s concerns.
“It does seem like the Microsoft and the CMA could work out a deal within the next couple of weeks,” said DA Davidson & Co analyst Franco Granda.
While much of the testimony in the recent trial focused on Call of Duty, Activision produces other bestsellers like World of Warcraft, Diablo and the mobile game Candy Crush Saga.
The FTC’s complaint had cited concerns about loss of competition in console gaming, as well as subscriptions and cloud gaming.
To address the agency’s concerns, Microsoft agreed to license Call of Duty to rivals, including a 10-year contract with Nintendo, contingent on the merger closing.
During the five-day trial in June, Microsoft CEO Satya Nadella argued the company would have no incentive to shut out Sony’s PlayStation or other rivals in order to sell more Microsoft Xbox consoles.
Reuters