A Verdict Has Been Reached in the Microsoft vs. FTC Trial

The waiting is over, and we have a decision on the recent trial between the Federal Trade Commission (FTC) and Microsoft. Judge Jacqueline Scott Corley has ruled in favor of Microsoft, denying the FTC’s preliminary injunction request.

“Microsoft’s acquisition of Activision has been described as the largest in tech history,” Judge Corley said in the ruling. “It deserves scrutiny. That scrutiny has paid off: Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services.

“This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted — perhaps even terminated — pending resolution of the FTC administrative action.

“For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED.”

… the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition.

In a statement issued to IGN, FTC spokesperson Douglas Farrar said: “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.”

Activision Blizzard boss Bobby Kotick also issued a statement: “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.”

Microsoft president Brad Smith said the company was “grateful” to the court for its decision: “We’re grateful to the Court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution. As we’ve demonstrated consistently throughout this process, we are committed to working creatively and collaboratively to address regulatory concerns,” Smith said in a statement issued to IGN.

Xbox boss Phil Spencer also tweeted his reaction:

1/We’re grateful to the court for swiftly deciding in our favor. The evidence showed the Activision Blizzard deal is good for the industry and the FTC’s claims about console switching, multi-game subscription services, and cloud don’t reflect the realities of the gaming market.

— Phil Spencer (@XboxP3) July 11, 2023

3/We know that players around the world have been watching this case closely and I’m proud of our efforts to expand player access and choice throughout this journey. END

— Phil Spencer (@XboxP3) July 11, 2023

The decision leaves the door open for Microsoft to complete the buyout before the July 18 deadline. But the company still has some hurdles to go through with regulators, such as the UK’s Competition Markets Authority (CMA), which blocked the deal earlier this year, though Microsoft has since appealed the decision and a hearing is set for July 28 and will conclude on August 4.

In an updated statement issued to IGN, Microsoft’s Brad Smith said it is now “considering how the transaction might be modified” in order to address the CMA’s concerns. As a result, Microsoft, Activision and the CMA have agreed on a stay of the litigation in the UK. This means a pause of Microsoft’s appeal in the UK as the three parties thrash out a satisfactory restructure of the transaction.

“After today’s court decision in the U.S., our focus now turns back to the UK,” Smith said. “While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA. In order to prioritize work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of the litigation in the UK would be in the public interest and the parties have made a joint submission to the Competition Appeal Tribunal to this effect.”

The CMA told IGN: “We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our final report. In order to be able to prioritise work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of litigation in the UK would be in the public interest and all parties have made a joint submission to the Competition Appeal Tribunal to this effect.”

The CMA is concerned about the buyout’s implications for cloud gaming, saying: “The deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”

Last month, both parties went to court, the trial lasted four days, and several reveals were made. From court documents revealing a shortlist of game developers Xbox was interested in acquiring to fill content gaps to PlayStation boss Jim Ryan admitting that he does not find Starfield being an Xbox console exclusive being “anti-competitive,” and Microsoft CEO Satya Nadella saying he “has no love” for console exclusives. 

If you want to learn more about what when on during the four-day trial. Check out a full recap of the hearing. If you want a breakdown of each individual day, check out our analysis pieces, where we dissect every day of the trial.