Tech

Justice agrees with Microsoft against the FTC

Today is a good day for Microsoft, not the most anticipated day, but a very positive one., both for what happened and, and this is even more important, for the meaning of it. And yes, as you have surely already imagined, we are talking about the long journey that the Redmonds have had to go through since they announced, at the beginning of last year, their intentions to acquire Activision Blizzard King, thus substantially growing their position in the market. of the games.

Since then, as you well know, Microsoft it has faced both part of its competitionwith Sony playing a very predominant role in this regard) like the regulators that, due to the size of the operation, they have wanted to submit it to a deep analysis before determining if they consider that it could harm competition in the multiple branches of the multi-million dollar video game sector.

As we have been telling you over the months, the regulators of Japan, the European Union and China, among many others, have already given the go-ahead to the operation, but the reverse of the coin is signed. the British CMA with its refusalin which they state (contrary to the opinion of the industry they claim to defend) that the acquisition would be harmful to the cloud gaming market, and the US FTC which, along with Sony, is playing the most aggressive role against the operation.

We must remember that the US regulator has not come to rule in favor or against the operation in a definitive position. However, what he has done on more than one occasion is to resort to the courts in order for them to block the operation. He already did it earlier this year, in order to try to influence the decision of European regulators, in a move that obviously did not work in the way the FTC wanted.

Justice agrees with Microsoft against the FTC

And more closely, just a few weeks ago, the FTC turned to Justice again, in order to temporarily block the acquisition of ABK by Microsoft. However, and as we can read in the sentence, Justice has agreed with Microsoft and, consequently, has unblocked the purchase of Activision Blizzard King. A judicial victory that, without a doubt, represents a very important turn of events, and it is for several reasons.

The first, and most obvious, is the endorsement that means for Microsoft that Justice takes its side, but this is an even greater reinforcement when reading from the court document. This fragment of it is particularly noteworthy:

“Microsoft’s acquisition of Activision has been described as the largest in the history of technology. 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 at parity with Xbox. He reached an agreement with Nintendo to bring Call of Duty to Switch. And it signed several deals to bring Activision content to various cloud gaming services for the first time.

The liability of this Court in this case is limited. It is to decide whether, despite these current circumstances, the merger should be halted, perhaps even rescinded, pending resolution of the FTC’s administrative action. For the reasons explained, the Court finds that the FTC has failed to demonstrate the likelihood of prevailing in its claim that this particular vertical merger in this specific industry can substantially reduce competition. On the contrary, docket evidence points to increased consumer access to Call of Duty and other Activision content. Therefore, the motion for injunction is DENIED.»

Thus, the court not only agrees with Microsoft, but also notes that it has not been possible to show that the FTC’s fears are well founded. quite the contrary, recognizes the transaction as potentially positive for the market that the FTC claims to protect. In other words, the bloc made up of the CMA, the FTC and Sony hears again, from another voice that participates in this eternal process, that their arguments are wrong.

Justice agrees with Microsoft against the FTC

But there is still more. As I recalled at the beginning, the purchase operation was announced on January 18, 2022, and both parties (Microsoft and ABK) stipulated a period of 18 months for the operation to be completed. That is the deadline is July 18, just a week from now and, in the event that it cannot be completed, Microsoft will have to pay Activision Blizzard the not inconsiderable amount of 3,000 million dollars. Thus, it does not appear that the FTC’s move to try to block the operation through the courts so close to the deadline is a coincidence.

If the sentence had been delayed for a week, and given that until the court’s pronouncement the precautionary measure remained active, Microsoft would have seen the clock run with its arms tied, without being able to do anything. However, the fact that the court has unblocked the operation (in the absence of the FTC’s pronouncement, yes), completely changes the situation, since at this moment there are no legal conditions that prevent Microsoft and ABK from moving forward.

Although Microsoft is litigating in the United Kingdom in order to try to reverse the blockade established by the CMA, practically from the first day after that controversial decision we began to receive signs that the Redmond were considering going ahead, even if this meant having to substantially modify their operations in the United Kingdom. This is somewhat more complicated in the United States, since we are talking about the local market of both companies, but that it is complicated does not mean that it is impossible.

By analyzing the historical it is clear that the FTC has tried to stop the operation on several occasions, but indirectly, either through the courts or trying to mediate the position of other regulators such as the European one. However, what has been his last move in this regard (except for surprises) has not had the desired effect.

Justice agrees with Microsoft against the FTC

And now that? Is Microsoft going to buy Activision Blizzard King?

That’s the million dollar question. In the absence of a definitive pronouncement by the FTC, which at the moment does not have a scheduled date, the term to complete the operation is about to run out, and Microsoft is playing a lot. So much so that the option to close the purchase process is on the table even if the US regulator later rules against it.. A pronouncement that, however, after the judicial setback he received today, seems more difficult than ever.

Although before, in the quick reminder, I mentioned that Microsoft has gone to court to try to unblock the situation in the United Kingdom, the truth is that both parties have paused said judicial process today to sit down to negotiatethat is, if both parties are willing to give up on some point, It is possible that the operation in the United Kingdom will be unblocked with the approval of the CMA.

It is not the same, of course, to give up the British market than the American one, but it is no less true that The FTC knows, since it began to investigate the operation, the period stipulated by the parties for it to be completed, and we are talking about a term that has been more than enough for the rest of the regulators. Heck, even a San Francisco court has been able to analyze the situation and reach conclusions on it in about a month.

Just a few days ago, it looked like Microsoft would have to pay ABK for missing the purchase deadline and sit down to renegotiate the deal anyway, and the FTC may have been hoping that was the story to come. count in a week. However, the speed with which the court has ruled and the sense in which it has done so, can play a determining role in what happens in the next few days.

If Microsoft and the CMA reach an agreement, and the FTC doesn’t make some other move to try to block the deal, the possibility of Microsoft finally taking control of Activision Blizzard King is closer than ever. Thus, right now all eyes are focused both on the negotiations that have been established in the United Kingdom, and on the US regulator which, in view of the global situation, is at a point where the sensible thing to do would be to admit your mistake and your defeat, and allow the purchase to be completed within seven days.

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