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U.S. Judge Allows Microsoft’s Acquisition of Activision Blizzard, Dealing Blow to Biden’s Antitrust Efforts

In a significant ruling on Tuesday, a U.S. judge granted permission for Microsoft, the creator of the Xbox gaming console, to proceed with its planned acquisition of videogame giant Activision Blizzard for a staggering $69 billion.

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The decision poses a setback to President Joe Biden’s endeavors to curtail corporate consolidation, which some argue has negative implications for consumers. Following the judge’s ruling, the Competition and Markets Authority (CMA) in Britain, which had expressed objections to the deal back in April, announced its readiness to review Microsoft’s proposals aimed at addressing antitrust concerns in the UK.

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If finalized, the acquisition would mark Microsoft’s largest deal to date and become the largest in the history of the videogame industry. As news of the ruling broke, Activision shares experienced an 11.3% surge, reaching $92.01, while Microsoft shares remained steady.

The Federal Trade Commission (FTC) had urged U.S. District Judge Jacqueline Scott Corley in San Francisco to halt the proposed merger, citing concerns that it would grant Microsoft exclusive access to Activision games, including the immensely popular “Call of Duty.” The agency worried that such exclusivity could limit the availability of these videogames on other platforms.

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

Corley’s decision represents yet another obstacle for the Biden administration’s endeavors to intensify antitrust enforcement efforts. The U.S. court in San Francisco granted the FTC until Friday to appeal the judge’s ruling.

FTC spokesperson Douglas Farrar expressed disappointment in the outcome, emphasizing the perceived threat this merger poses to open competition in cloud gaming, subscription services, and consoles. Farrar stated, “In the coming days, we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”

Microsoft President Brad Smith expressed gratitude for the “quick and thorough” decision and indicated the company’s focus would now shift to addressing concerns in Britain. Smith tweeted, “While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA.”

RBC Capital Markets analyst Rishi Jaluria highlighted that the deal would position Microsoft as the third-largest gaming company globally, a surprising development reflected in the 11% surge in Activision’s stock.

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At the heart of the Microsoft-Activision deal lies a quest for dominance in the gaming market, which is projected to witness a 36% sales increase over the next four years, reaching $321 billion according to PwC estimates. While much of the trial testimony centered on “Call of Duty,” Activision is renowned for producing other popular titles such as “World of Warcraft,” “Diablo,” and the mobile game “Candy Crush Saga.”

The FTC argued that Microsoft could potentially leave rival console makers like Nintendo and market-leader Sony Group out in the cold by leveraging the Activision games. The FTC expressed concerns about a loss of competition in console gaming, as well as subscriptions and cloud gaming.

To address these concerns, Microsoft agreed to license “Call of Duty” to rivals, including a 10-year contract with Nintendo, contingent upon the merger’s completion. During the five-day trial in June, Microsoft CEO Satya Nadella asserted that the company had no incentive to exclude Sony’s PlayStation or other competitors in order to promote sales of Microsoft Xbox consoles.