SAN FRANCISCO, CALIFORNIA – JUNE 28: XBOX CEO Phil Spencer (L) arrives at federal court on June 28, … [+] 2023 in San Francisco, California. Top executives from Microsoft and Activision Blizzard will be testifying during a five day hearing against the FTC to determine the fate of a $68.7B merger of the two companies. (Photo by Loren Elliott/Getty Images)
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Two things can be true: You can respect the FTC’s recent mandate to hold huge megacorps to account so they don’t abuse their monopolistic powers, and you can also admit that they made an absolutely terrible case to try and stop the Microsoft acquisition of Activision Blizzard for $69 billion.
The Federal Trade Commission failed to land an injunction pausing the deal, something that Microsoft and Activision both said may have killed it, but the opposite result now means the acquisition is almost a sure thing. The FTC scrambled to pause the decision before appeal, which went to the same judge, and was almost instantly rejected yesterday. The appeal will go to the 9th Circuit Court soon.
Microsoft maintained that the FTC’s appeal filing did not “identify a single legal error in the Court’s reasoning,” nor any reason that further complaints would actually change the outcome of the case. It appears the judge agreed with that.
In a similar case in the EU, the Commerce and Markets Authority is said to have started negotiating with Microsoft and may be taking a second look at the case. One solution to that situation in the U.K. may end up being Microsoft farming out distribution to a third party to satisfy the stipulations over there. But there is absolutely nothing the CMA is going to do to stop this overall deal from happening. And it appears the FTC isn’t going to be doing that either.
WASHINGTON, DC – JULY 13: Federal Trade Commission Chair Lina Khan testifies before the House … [+] Judiciary Committee in the Rayburn House Office Building on Capitol Hill on July 13, 2023 in Washington, D.C. The committee and its chairman, Rep. Jim Jordan (R-OH), have accused Khan and the commission of “mismanagement,” “disregard for ethics and congressional oversight” and “politicized rulemakings.” (Photo by Chip Somodevilla/Getty Images)
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The FTC’s failure here has cast a hard spotlight on its chair, 34-year-old Lina Khan, the young rising star who has now been dimmed with her failure to win multiple cases against large corporations. The Microsoft Activision failure is likely the biggest in her tenure so far.
Again, for this specific case, the FTC simply took a poor position that even the judge, during the trial, said was mostly about defending a single company, Sony, and its PlayStation brand, rather than consumers at large. The FTC also demonstrated an utter lack of knowledge about the industry, infamously saying that Microsoft could make exclusive “Christmas characters” that Sony couldn’t have, when Sony has had a deal to give itself exclusive characters as recently as this year. The FTC ignored that almost everything it was accusing Microsoft of doing with exclusivity has been what Sony has been doing for years with its own franchises, where despite huge sales and critical acclaim, no one is expecting them to lend them to Xbox. And the FTC unable to convince anyone that Microsoft is lying about its promise to leave Call of Duty on PlayStation in the first place.
The FTC fumbled badly here. Its case was terrible and flew in the face of dozens of other countries approving the deal. Not to say the acquisition approval is a right or wrong decision, but inarguably it did not do a job making the legal case that it shouldn’t happen. So we should expect the deal to go through by at least the end of this summer, if not within the week, given how fast things are moving.
Correction: An earlier version of this article said the FTC had lost their appeal, they instead had their request to pause the deal before appeal denied.
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