The Federal Trade Commission (FTC) has launched an appeal against a court ruling that allowed Microsoft's proposed $69 billion acquisition of Activision Blizzard to proceed. This move comes as the FTC seeks to block the deal, despite the setback of losing the initial court ruling.
In its appeal to the 9th Circuit Court of Appeals in San Francisco, the FTC aims to overturn the decision made by a lower-court judge who concluded that the merger would not harm competition in the markets for console, subscription, and cloud gaming, and would not negatively impact consumers.
The FTC had initially requested a preliminary injunction to halt the deal before a July 18 deadline, but this was rejected by US District Judge Jacqueline Scott Corley on Tuesday. Undeterred by this setback, the FTC is determined to challenge the merger in an antitrust battle, which is seen as a crucial test of the agency's ability to block large-scale tech deals in court.
FTC Chair Lina Khan defended the agency's decision to appeal the ruling during a House Judiciary Committee hearing, amidst criticism from Republicans about the agency's record of merger losses. She emphasized that the FTC fights vigorously when it believes there has been a violation of the law and that any adverse ruling prompts a careful examination of the legal aspects to assess the grounds for an appeal.
To extend the temporary hold on the Microsoft-Activision merger, which is set to expire soon, the FTC would require an emergency stay from the 9th Circuit Court of Appeals. This latest appeal creates an additional legal hurdle for Microsoft as it pushes forward with its plans to expand its footprint in mobile gaming and become the third-largest player in the global gaming market, following Tencent Holdings Ltd. and Sony Corp.
In addition to the FTC's opposition, Microsoft is also facing challenges from the UK's Competition and Markets Authority (CMA), which vetoed the merger in May. However, following Judge Corley's decision, the CMA expressed willingness to reassess proposals from Microsoft and agreed to pause the appeal process, providing an opportunity for the companies to suggest remedies that address the CMA's concerns about potential competition issues. Nonetheless, any restructuring of the deal might trigger a fresh investigation by the UK's antitrust watchdog.