Microsoft-Blizzard Deal Explained: Court ruling, FTC's objection, Microsoft's gain, and more

As a US federal judge in California on Tuesday allowed Microsoft to complete its acquisition deal with Activision Bizzard, it came as a big relief to the software giant. The deal worth $68.7 billion, considered the biggest in the tech industry, will give Microsoft an edge in the gaming industry with the ownership of some of the world's most popular games, including Call of Duty, World of Warcraft, and more.

The court ruling also halted the American government's attempt to halt the deal as the Federal Trade Commission (FTC) felt the deal was a threat to open competition in cloud gaming, consoles, and subscription services. ZeeBiz takes you through the various factors involved in the deal.

What does Microsoft-Blizzard deal mean 

The gaming business has emerged highly lucrative in the last decade, and to cash in on its growing stature, Microsoft announced on January 18, 2022, that it would acquire Activision Blizzard, a S&P 500 gaming company  with the ownership of games like, Call of Duty, StarCraft Series, Warcraft Series, Candy Crush Saga, etc.

Microsoft said that it would acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion.

The company had claimed that the deal would make it the world's third-largest gaming company by revenue, behind Tencent and Sony.

The planned acquisition included franchises from Activision, Blizzard, and King studios like Warcraft, Diablo, Overwatch, Call of Duty, and Candy Crush, in addition to global eSports activities through Major League Gaming. 

The deadline for the completion of the acquisition was set for July 18, 2023. 

Why FTC was against deal

The deal seemed to hit a roadblock when the FTC moved court in June this year, seeking a temporary halt to the multi-billion-dollar deal. In its argument, the FTC said the deal could harm competition in various markets related to consoles, subscription services, and the cloud (for gaming).

The FTC further argued that if the acquisition deal went on, it would grant Microsoft's Xbox videogame console sole access to Activision games, putting Nintendo consoles and Sony Group Corp's PlayStation at a disadvantage.  

What court said in its ruling

United States Federal Judge Jacqueline Scott Corley said in her ruling: "Microsoft’s acquisition of Activision has been described as the largest in tech history. It deserves scrutiny. That scrutiny has paid off. Microsoft has committed in writing, in public, and in court to keep Call of Duty on PlayStation for 10 years on parity with Xbox. It made an agreement with Nintendo to bring Call of Duty to Switch. And it entered several agreements to for the first time bring Activision’s content to several cloud gaming services. This Court’s responsibility in this case is narrow. It is to decide if, notwithstanding these current circumstances, the merger should be halted—perhaps even terminated—pending resolution of the FTC administrative action. For the reasons explained, the Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition. To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content. The motion for a preliminary injunction is therefore DENIED." 

Will FTC continue its legal fight?

After the court ruling, FTC spokesperson Douglas Farrar said in a statement that the regulator was still planning its next move.

He said that in the coming days, the FTC would be announcing its next step "to continue our fight to preserve competition and protect consumers".

The FTC can appeal against the decision before 11:59 PM (Pacific Time) on July 14.

Can merger still face some roadblocks?

Even as the FTC was trying to halt the deal, the UK regulator, the Competition and Markets Authority (CMA), in April also blocked Mcirosoft's deal, citing the acquisition would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come. 

It could have dented Microsoft's plan to acquire the gaming company, with the FTC also chasing the US software company.

However, Microsoft got approval from the European Union in May, and, hence, got a chance to bypass the CMA for completing the acquisition.

But both the CMA and Microsoft probably wanted to avoid such a situation.

So, minutes after the California judge's decision, the CMA also agreed to pause its legal battle with Microsoft.

What Microsoft will get from acquisition

Microsoft has strong footing in the gaming market through its XBox console, but with the acquisition of such a big company with so many popular games, Microsoft has established itself as one of the world's leading gaming companies.

Though at the moment it has agreed to keep Call of Duty on PlayStation and also signed agreements with Nintendo and Nvidia to ensure the availability of content for their platforms, it can find other ways to become the No. 1 gaming company by acquiring more firms and developing new games.