(Bloomberg) -- Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc. drew questions from an appeals court that was reviewing the Federal Trade Commission’s challenge to a ruling that cleared the deal earlier this year.

Jennifer Sung of the appeals court in San Francisco repeatedly pushed Microsoft’s lawyer on whether the company’s plan to release Activision titles on the cloud, in addition to video-game consoles, adequately addressed antitrust concerns. 

“That’s not actually procompetitive,” Sung said at the hearing. “That might benefit some consumers, but you can’t equate a benefit to some consumers to a procompetitive effect.”

Microsoft and Activision closed the largest-ever gaming deal on Oct. 13 after a nearly two-year fight with global regulators. After a multi-day hearing, Judge Jacqueline Scott Corley rejected the FTC’s bid to block the deal in July. But the FTC didn’t give up its fight, pursuing both the appeal and an in-house trial that will start after the court issues its decision. 

It’s too late for the appeals court to block the deal since the companies completed their merger in October. But a ruling favorable to the FTC could boost its chances in the in-house proceedings overseen by an administrative law judge. 

A win there could allow the regulator to seek to unwind the deal, a step that would likely lead to even more litigation. While rare, such action isn’t unheard of. The agency is already trying to reverse Illumina Inc.’s 2021 purchase of cancer detection startup Grail. 

Wednesday’s arguments lasted for nearly 90 minutes – twice the amount of time allotted – as judges peppered the lawyers with questions.

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Judge Daniel Collins noted that Microsoft appears to be the market leader in both subscription and cloud-based gaming. 

The judge highlighted evidence in a related private suit related to the deal brought by gamers that indicated the Xbox maker hoped to “spend Sony out of business.” Plaintiffs in that case argued their appeal before the same panel immediately before the FTC.

Judge Danielle Forrest made similar comments, focusing on Redmond, Washington-based Microsoft’s strength in the cloud market. 

“Microsoft’s gonna get there first, and it’s gonna get there big because it’s got, you know, the best infrastructure,” said Forrest. Microsoft’s “going to make decisions to make sure that it’s the biggest dog in that market forever.”

Microsoft lawyer Rakesh Kilaru said the FTC is changing its arguments from the trial over the summer. He said the FTC didn’t previously contend that Microsoft’s purchase would lead to a monopoly in cloud and subscription gaming and shouldn’t be allowed to do so now. 

The agency instead argued that Microsoft would prevent rival online and console-based gaming services from gaining access to Activision content, he said.

State of Affairs

“There isn’t evidence in the record that that state of affairs will harm competition,” he said.

FTC attorney Imad Abyad trained his sights on Corley’s decision, arguing that she resolved factual disputes in her opinion instead of issuing a ruling that temporarily blocked the deal and allowing the agency’s in-house trial to play out.

“The district court is not supposed to make findings on disputed evidence,” he said. “If there is disputed evidence, that’s enough to grant relief.”

The FTC wasn’t the only regulator that had problems with the deal. The UK’s Competition and Markets Authority initially sought to block the merger, but rethought its case after Corley’s ruling and instead worked out a settlement with the companies.

Collins pressed Abyad on why the UK settlement – where Microsoft agreed to sell the cloud rights of Activision games released over the next 15 years to Ubisoft Entertainment SA – wasn’t sufficient to resolve the concerns of US antitrust enforcers.

“We don’t know whether it would be enforceable in the US,” Abyad said. “We don’t know whether it would be enough to undo the harm in the US market, as opposed to the UK market.”

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