Microsoft-Activision Deal Faces Test in FTC Hearing

Microsoft-Activision Deal Faces Test in FTC Hearing

Tech News

A federal judge is slated to hear arguments Thursday in the Federal Trade Commission’s lawsuit seeking to block Microsoft from acquiring Activision Blizzard, a closely watched case that could determine the fate of their $75 billion proposed deal.

The proceeding before U.S. District Judge Jacqueline Scott Corley is a major test for the Biden administration’s more aggressive approach to antitrust enforcement. Corley is a Biden appointee who sits in San Francisco.

The hearing will cover the FTC’s request for a temporary injunction preventing Microsoft and videogame developer Activision from closing their deal.

The companies have a deadline to close the deal next month. Microsoft and Activision have said they planned to complete the merger as they seek regulatory approval.

A ruling in the FTC’s favor would temporarily prevent the two companies from merging and could doom the whole deal. If the court denies the FTC’s request for an injunction, the agency might abandon its challenge to the merger rather than proceed and risk further unfavorable precedents.

“As history shows, the Court’s ruling on the FTC’s request for a preliminary injunction will decide the fate of this transaction, particularly in light of the termination date of July 18, 2023,” the companies said in a June 14 court filing.

While regulators in the European Union, China and other markets have approved the transaction, the U.K.’s Competition and Markets Authority blocked it in April after a monthslong investigation.

Corley is scheduled to begin a multiday hearing Thursday morning to consider the FTC’s request for a preliminary injunction blocking the acquisition. She has set aside five days to hear arguments and testimony: June 22-23 and June 27-29.

The chiefs of Microsoft and Activision are due to testify along with executives from Nintendo, Nvidia and Alphabet’s Google, plus a number of expert witnesses.

Jim Ryan, chief of Sony Group’s videogaming business, is expected to provide a deposition by video. Sony, whose PlayStation consoles compete with Microsoft’s Xbox machines, has been among the loudest critics of the deal.

Microsoft announced its plans to buy Activision in January 2022 and valued the deal at $69 billion after adjusting for the videogame publisher’s net cash.

In December, the FTC sued to block the deal, saying it would be illegal because it would give Microsoft the ability to control how consumers beyond users of its own Xbox consoles and subscription services access Activision’s games.

The company could abuse its position by raising prices for people who don’t use Microsoft’s hardware to access the games, or even cut off access entirely, the FTC argued.

Microsoft and Activision assert the deal would increase competition in the global videogame industry. Microsoft has offered commitments to make “Call of Duty” and other Activision games equally accessible to rival console makers and cloud-gaming companies over a 10-year period.

The FTC filed that lawsuit in its in-house court and at the time didn’t seek an emergency order to stop the deal because the closing date was more than seven months away. A trial in the FTC’s court is scheduled for early August

On June 12, the FTC filed its request for a preliminary injunction in federal court.

If Corley denies the FTC’s request for an injunction, the commission could continue its separate, in-house lawsuit, but the FTC more often drops its opposition to a deal if a judge denies an injunction.

Earlier this year, the FTC abandoned its in-house court proceedings against Meta Platforms’ acquisition of virtual-reality company Within Unlimited after a judge in San Jose, Calif., denied the agency’s request for an injunction.

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