FTC Loses Appeal Bid to Block Microsoft-Activision Deal

Leah Nylen and Cecilia D'Anastasio, Bloomberg News

The Activision Blizzard logo on a smartphone arranged in the Brooklyn borough of New York, US, on Monday, May 16, 2023. Microsoft Corp.'s $69 billion takeover of Activision Blizzard Inc. won European Union approval, putting the bloc at odds with its UK and US counterparts. Photographer: Gabby Jones/Bloomberg , Bloomberg

(Bloomberg) -- A US appeals court denied a Federal Trade Commission bid to pause Microsoft Corp.’s acquisition of Activision Blizzard Inc. Friday, clearing a path for the companies to close the largest gaming deal ever in the US.

The 9th Circuit US Court of Appeals ruling means that only UK regulators stand between the companies closing the deal before a July 18 deadline. Britain’s antitrust appeals court has scheduled a hearing July 17 to discuss the companies’ request to pause the challenge to their deal by the country’s competition agency.

“This brings us another step closer to the finish line in this marathon of global regulatory reviews,” Microsoft President Brad Smith said in a statement. Activision didn’t immediately respond to a request for comment.

Activision climbed as much as 4.4% in after-hours trading, rising to $94 from its close of $90.07. Microsoft gained 1.5%.

The ruling is a blow to the FTC and its Chair Lina Khan, who sought to block the merger over concerns that Microsoft would withhold Activision’s most popular games from rival consoles or services. The court-ordered pause on Microsoft’s Activision merger was set to expire at midnight Pacific time on Friday.

Microsoft has strong incentive to close the deal before the July 18 deadline to avoid paying a $3 billion breakup fee to Activision.

The FTC declined to comment on the ruling and whether it plans to pursue its internal case opposing the deal. Proceedings before an FTC administrative judge were scheduled to start Aug. 2.

The UK Competition and Markets Authority, which vetoed the merger in April amid concerns over the deal’s impact on the cloud gaming market, has agreed to give Microsoft an unprecedented second chance to offer a remedy. Microsoft has offered to sell off the cloud-based market rights for games in the UK, Bloomberg earlier reported.

Read More: Microsoft, Activision Eye UK Rights Sale to Get Merger Done

In a procedural move separate from this week’s developments, the CMA said Friday it had extended its deadline for issuing a legally final order on the deal until Aug. 29.

--With assistance from Malathi Nayak.

(Updates with FTC declining to comment.)