April 25, 2023 | 3:13 pm
Microsoft is planning to complete its $69 billion acquisition of Activision Blizzard despite the Federal Trade Commission’s December move to block the deal over antitrust concerns, The Post has learned.
Microsoft is optimistic about getting UK approval for its acquisition, which was attacked by FTC chair Lina Khan as an unfair mega-merger that will stifle competition in the gaming industry this week, according to sources close to the gaming giant. technology.
That’s because antitrust regulators in the UK and the EU have made surprising progress in recent weeks towards approving the merger influenced by Microsoft’s pledges to give rivals, including Sony and Nintendo, access to its blockbuster video game franchise Call of Duty, sources said.
While approval from the UK Competition and Markets Authority is expected this week, Microsoft hopes a final approval from the European Commission will come next month, said the source familiar with the situation.
That, in turn, could make the FTC’s challenge on Dec. 8 to file a complaint to stop the deal with an FTC administrative law judge an uphill battle, according to antitrust experts.
They’re going to shove it down the FTC’s throat, said a source familiar with the situation.
If it gets European approvals, Microsoft’s plan is to quickly close the merger of the Call of Duty maker for $95 a share, the source said.
Activision was trading at $85.63 on Tuesday afternoon. The shares would likely jump to nearly $95 if Microsoft closes the merger and fall to around $75 if Microsoft exits the deal, a trader said.
Usually, it’s easier to win a lawsuit to block a merger by going through an internal judge of the FTC rather than a US district court. But an FTC judge can’t issue a preliminary injunction to prevent a deal from closing.
At the time this was not considered a big deal as Microsoft had not received UK or EU approvals. However, Microsoft has made concessions by making the controversial merger with the UK’s Competition and Markets Authority (CMA) more comfortable.
The CMA has been the toughest regulator in recent years with technology deals, the source familiar with the situation said.
Microsoft, which owns the Xbox game console, has been working to get CMA approval by agreeing in recent weeks to offer companies like Ubitus and Boosteroid access to Activision games on their cloud-based video game streaming services for 10 years.
He has also signed a deal with Nintendo, which currently does not have access to Call of Duty.
A big concern for regulators was that Microsoft would only keep Activision games on Microsoft’s Game Pass subscription service, hurting competitors who were looking to launch their own cloud gaming services.
CMA said earlier this month that it was only concerned about competition issues in the cloud and was no longer concerned about Microsoft dominating the console market where it competes with Sony’s PlayStation.
Microsoft CEO Brad Smith has publicly stated that Khan’s FTC didn’t even want to discuss these kinds of concessions.
The FTC can still file for a temporary injunction from a US federal court to prevent the merger from closing, but getting that ruling is far from a sure thing, said a DC antitrust source not on either side of this case.
By law the FTC only needs to raise serious and dubious questions about a merger to get an injunction, the source said. But in practice the judge is considering the merits of the case.
If Microsoft makes a deal with the British and the European Union it can say that the antitrust issues are resolved, and if you’re a judge that’s not a useful fact for the FTC.
The FTC will be out there on its own and make it harder to get any court-approved decision, Penn University professor and antitrust expert Herbert Hovenkamp told The Post.
Legal experts have said for months that they believed the FTC’s complaint would already be hard to win.
The FTC argues that Microsoft, being a major console maker via Xbox and owning Activision, would have too much market power.
He claims the Microsoft-Activision transaction would create[e] a company combined with the ability and a greater incentive to withhold Activision’s valuable game content or degrade Activision’s content for Microsoft’s rivals, law firm Arnold & Porter which is following the case said in a note to clients.
FTC points out that 10 of the top 15 console games sold between 2010 and 2019 werecall of Dutygames and the latest game in the seriesModern warfare IIreleased in 2022, it generated $1 billion in sales in its first ten days of release.
But Arnold & Porter also points out that Microsoft claims it’s only the third-largest console maker and has no stake in mobile gaming.
Microsoft’s proposed acquisition is that of a customer buying a major vendor, a vertical acquisition, and vertical cases are typically more difficult for antitrust regulators to bring. The Antitrust Division’s unsuccessful attempts to block AT&T’s acquisition of Time Warner and United Health’s acquisition of Change Healthcare are recent examples, Arnold & Porter said.
If a federal judge rules against a temporary injunction that will make it much harder for the FTC to win in its domestic court, the source familiar with the situation said.
Khan hoped to block this deal without ever having to win in court, sources said.
The FTC got a relatively late hearing date when it filed the lawsuit to stop the merger in its domestic court. The hearing is now scheduled for August 2, which is several weeks after the deadline of Microsoft’s July 18 merger with Activision.
Even internal FTC hearings typically take more than a year to conclude.
The belief was that Activision would exit the deal after July 18 by collecting a $3 billion termination fee, sources said. This would make the underlying merger case moot as there would no longer be a merger to block.
The FTC was trying to kill the settlement process, the source familiar with the situation said, explaining the delays helped the regulator.
The safe move now for Khan is to stay the course and not seek a federal court injunction if the CMA and the European Union approve the merger, the antitrust source said.
And then negotiate the best deal it can get from Microsoft along the same lines as the Europe deals.
Or continue pursuing the case in its domestic court and hope to win and get the merger dissolved, even though that could take more than a year.
In my view, this is the smart play, said the antitrust source.