What just happened? In a historic decision, the US District Court for the Northern District of California has denied the Federal Trade Commission's injunction request against Microsoft's Activision acquisition. The ruling comes just in time, as the merger's July 18 deadline is right around the corner.
Judge Jacqueline Scott Corley's Tuesday ruling admits that the $68.7 billion deal "deserves scrutiny" but that the FTC failed to provide adequate reason for halting the buyout while it finished its regulatory action. Corley points out that Microsoft has repeatedly committed to publishing Activision games on other platforms and offering them on cloud-gaming services for the foreseeable future.
The FTC filed it injunction request last month to put the deal on ice while it assessed the case and came to a decision. Essentially, the Commission requested the federal court halt the sale, scheduled to finalize in seven days, because it was not ready to approve or deny the merger.
Judge Corley said it was her Court's "responsibility" to determine if preventing the acquisition was warranted and in the consumer's best interest. In her opinion, the FTC did not present adequate evidence that Microsoft would limit competition if allowed to complete the deal.
"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," Corley wrote. "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 (emphasis hers)."
The ruling means that Microsoft and Activision can finally complete their merger despite the FTC's concerns. The Commission can file an appeal before July 18, but that would be a Hail Mary attempt to quash at this point. Although, the trade regulator can still undo a completed acquisition even years after the deal is signed, it's a rarely pursued process. Microsoft would have to blatantly flout antitrust laws to prompt the Commission to file for dissolution.
Microsoft still has to contend with the UK's Competition and Markets Authority. However, it is currently in talks with the regulator to reach an amicable compromise.
Although the nearly $70 billion deal is a record-breaker for the video games industry, it falls short of making the top five biggest acquisitions in history, according to Investopedia. The number one spot goes to Vodafone's buyout of Mannesmann in 1999 for $180.95 billion. That merger would be valued at about $335 billion in today's economy.
Rounding out the top five biggest mergers (adjusted for inflation) are:
- America Online's 2000 purchase of Time Warner for $165 billion ($297 billion)
- Dow Chemical's 2015 buyout of Dupont for $130 billion ($169 billion)
- Anheuser-Busch bought Miller in 2016 for $104 billion ($134 billion)
- Verizon Communications acquired Verizon Wireless from Vodaphone in 2013 for $87 billion ($115 billion)
Despite the cost of the merger, the win should allow Microsoft to concentrate even more studios under its umbrella and leverage them to produce more exclusive content for the Xbox Series consoles aside from Call of Duty. However, existing killer titles, like the next Diablo, WoW, or Destiny games, are not likely to release in any timeframe that could hurt its main competitor, Sony – at least not in this generation.