FTC Asks Appeals Court to Pause Microsoft’s Activision Deal

Leah Nylen and Malathi Nayak, Bloomberg News

A legal team member carries materials including carrying an XBox Series S video game console while arriving to court in San Francisco, California, US, on Friday, June 23, 2023. Microsoft and Activision Blizzard CEOs are expected to testify to persuade a federal judge in California to reject the Federal Trade Commissions effort to block their $69 billion deal. , Bloomberg

(Bloomberg) -- The US Federal Trade Commission lost its request for a California judge to temporarily block Microsoft Corp. from closing its $69 billion takeover of Activision Blizzard Inc. while the agency appeals her ruling greenlighting the deal.

US District Judge Jacqueline Scott Corley issued a two-sentence order late Thursday rejecting the FTC’s latest effort to block the mega gaming deal.

The FTC is appealing Corley’s July 10 decision to the 9th US Circuit Court of Appeals. The agency also said Thursday it will seek emergency action by the 9th Circuit to stop the deal from closing. Barring court action, Microsoft and Activision can complete the deal as of 11:59 p.m. in San Francisco on July 14.

Microsoft and Activision had asked Corley to deny the FTC’s request for an injunction, arguing that she’d previously ruled it would be “inequitable” to block the deal in a way that would result in “the potential scuttling of the merger.”

Corley found that the blockbuster game deal won’t thwart competition in the markets for console, subscription and cloud gaming and harm consumers. She denied the agency’s request for a preliminary injunction that would have stopped the deal from closing.

Despite the huge blow, the FTC isn’t backing down in the antitrust fight that represents a major test of its ability to block big tech deals in court after the agency lost a challenge to an acquisition by Meta Platforms Inc. earlier this year.

FTC Chair Lina Khan defended the agency’s decision to appeal the ruling earlier Thursday during a House Judiciary Committee hearing. Republicans criticized the FTC’s record of merger losses, asking if she was “losing on purpose” to influence Congress to pass antitrust legislation.

“We fight hard when we believe there is a law violation,” she said. “When we get an adverse ruling, our teams look closely at the text of opinion and see if there are errors on matters of law that warrant an appeal.”

Earlier: FTC’s Khan Branded ‘Bully’ in GOP Attack Over Deals, Ethics

The appeal creates another legal hurdle for Microsoft is it pushes to close a deal that would help expand its presence in mobile gaming and vault itself to the No. 3 position in the global gaming market after Tencent Holdings Ltd. and Sony Corp.

The FTC is angling to move ahead with an administrative antitrust challenge to the deal that was scheduled to begin early next month. Microsoft also remains stuck in a battle with the UK’s Competition and Markets Authority that vetoed the deal in May.

Read more: Microsoft Cleared to Buy Activision in US as UK Pauses Fight

After Corley’s decision came down, the CMA said it’s willing to reassess proposals from Microsoft and agreed to pause the companies’ appeal before the Competition Appeal Tribunal. That hold gives the firms a chance to suggest potential fixes aimed at easing UK concerns that the takeover would stymie competition. But a restructuring of the deal could also trigger a new investigation by Britain’s antitrust watchdog.

--With assistance from Zoe Tillman and Greg Stohr.

(A previous version of the story was corrected to remove a reference to the FTC seeking a delay in an initial filing.)