Microsoft's Acquisition of Activision Blizzard Clears Hurdles

The Biden administration’s argument that consumers would be harmed by Xbox exclusive access to games like “Call of Duty” was rejected by U.S. District Judge.

Microsoft's Acquisition of Activision Blizzard Clears Hurdles

As a result of a U.S. judge’s approval of the $69 billion transaction and a British regulator’s suggestion that it might reconsider its opposition, Microsoft (MSFT.Oplan )’s to acquire videogame developer Activision Blizzard (ATVI.O) on Tuesday overcame significant obstacles.

The United States and Great Britain were the only two nations opposed to what would have been Microsoft’s largest deal ever and the largest transaction in the history of the videogame industry, sending Activision Blizzard shares up 10% on the day. To $332.47, Microsoft shares increased by 64 cents.

The Biden administration’s argument that consumers would be harmed by Xbox exclusive access to games like “Call of Duty” was rejected by U.S. District Judge Jacqueline Scott Corley. Microsoft’s proposals to address antitrust concerns in the UK are ready for review by the Competition and Markets Authority (CMA) of Britain, suggesting a potential resolution between the two parties.

Joost Van Dreunen, a lecturer at New York University’s Stern School of Business, claimed that all of the testimony that has come to light during the U.S. trial weakens the claims made by the UK’s antitrust watchdog.

The U.S. Federal Trade Commission (FTC) had argued that Microsoft would be able to use the Activision games to leave rival console makers like Nintendo (7974.T) and market leader Sony Group (6758.T) out in the cold.

According to her, “The FTC has not demonstrated that it is likely to succeed on its assertion that the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision Blizzard content will substantially lessen competition in the video game library subscription and cloud gaming markets.”

Douglas Farrar, an FTC spokesman, claimed the antitrust authority was “In light of the obvious threat that this merger poses to free competition in consoles, subscription services, and cloud gaming, we are disappointed in the outcome. We’ll be announcing our next move to advance our campaign to protect consumers and the free market in the coming days.”

A person with knowledge of the situation says that it is thinking about appealing the court’s ruling. Inquiries regarding the FTC’s intention to challenge the decision were not immediately answered.

According to a PwC prediction, gaming market sales will rise by 36% to $321 billion over the following four years.

The Biden administration’s broader effort to lower costs for consumers, which has included talks to lower the price of insulin medication and eliminate “junk fees” in airline tickets, has been hampered by Corley’s decision.

The company was appreciative of the “quick and thorough” decision, according to Microsoft President Brad Smith. Additionally, he tweeted that his attention would now be directed towards thinking through how the transaction might be altered to allay the CMA’s worries.

Franco Granda, a D.A. Davidson & Co analyst, stated that it “does seem like the Microsoft and the CMA could work out a deal within the next couple of weeks.”

While “Call of Duty” was the subject of a large portion of the recent trial’s testimony, Activision also creates popular games like “World of Warcraft,” “Diablo,” and the mobile title “Candy Crush Saga.”

In addition to subscriptions and cloud gaming, the FTC’s complaint raised concerns about the decline of competition in console gaming.

In order to allay the agency’s worries, Microsoft agreed to grant licences for “Call of Duty” to competitors, including a 10-year deal with Nintendo, subject to the merger’s completion.

Microsoft CEO Satya Nadella argued during the five-day trial in June that the company would have no incentive to exclude Sony’s PlayStation or other competitors in order to sell more Microsoft Xbox consoles.