It Ain’t Over: FTC Appeals Microsoft, Activision Ruling While CMA Pumps The Brakes On Restructuring Deal

Deals

from the how-appealing dept

Well, well, it appears that rumors of the death of the regulatory battle over the Microsoft and Activision Blizzard purchase have been greatly exaggerated. We just discussed media reports of two items related to the deal. The first was the FTC’s loss in court to get a preliminary injunction barring the two companies from consummating the purchase, potentially allowing them to close on the deal even as FTC litigation remains pending and the CMA in the UK works through Microsoft’s appeal of its blocking the deal. The second were reports that Microsoft and the CMA were close on a restructuring of the deal that would lead to the CMA granting its approval of the purchase. In that post, I indicated that those combined reports threw into question whether the FTC would even bother appealing the ruling.

Well, we have updates on both instances. To start, the FTC has officially appealed the ruling for the preliminary injunction to the 9th Circuit Court of Appeals.

The Federal Trade Commission (FTC) says it is appealing a recent US federal court order that cleared the way for Microsoft to purchase Activision Blizzard. The FTC has filed a notice that it’s appealing Judge Jacqueline Scott Corley’s decision, but we won’t know the regulator’s arguments until the full appeal is submitted to the Ninth Circuit Court of Appeals.

Now that the FTC is choosing to appeal Judge Corley’s decision, the regulator needs the Ninth Circuit Court of Appeals to issue an emergency stay to extend the existing temporary restraining order (TRO) that is set to expire at 11:59PM PT on Friday, July 14th. It’s not clear if the appeals court will even rule before the deal deadline on July 18th, potentially leaving the door open for Microsoft to close the Activision Blizzard deal on Monday or Tuesday without a restraining order in place.

The timing on this matters. Were Microsoft to rush to complete the deal prior to the ruling on the appeal, it would make it that much more complicated for the FTC to convince the courts to unring the bell, as it were. Given Microsoft’s opposition to the injunction to begin with, you would think the company might break its promise not to consummate the deal until all regulatory action is resolved to keep things moving. And, while we don’t currently have any insight into the FTC’s reasoning behind the appeal, I imagine it will largely be based on the lower court’s taking as gospel Microsoft’s pledge to treat CoD like it did Minecraft rather than the myriad of other titles that it has taken exclusive after acquiring other studios, like Zenimax. From my perspective, the lower court’s ruling rang as one-sided on levels that were bizarre.

But also in the post at The Verge, it turns out that reports that Microsoft and the CMA were aligned on a simple restructuring of the purchase were overstated as well.

In a surprise statement on Wednesday, the CMA then warned Microsoft’s opportunity to restructure its deal could “lead to a new merger investigation,” and that talks between the regulator and Microsoft were still at an “early stage.”

A report from CNBC originally claimed Microsoft and the CMA had agreed on a “small divestiture” to address the cloud gaming concerns, but was later corrected to clarify Microsoft has only offered “a small and discrete divestiture” that the CMA hasn’t necessarily accepted. CNBC didn’t expand on what that divestiture could involve, but such a scenario will likely be specific to the UK and could involve changes to Microsoft’s Xbox Cloud Gaming services in the region.

Which is all well and good, but if a restructuring of the deal is going to result in “a new merger investigation”, then that’s a major extension of the timeline for when that will all be resolved. Even if such an investigation were more truncated, it’s a delay that at least will push any approval past Microsoft’s self-imposed deadline to complete the deal.

That deadline can be moved, obviously, but the more important message this is sending is that the regulators aren’t done regulating yet and, for the FTC specifically, it appears that the fight some thought was over will instead go on.

Filed Under: 9th circuit, antitrust, call of duty, cma, competition, ftc, uk, video games
Companies: activision blizzard, microsoft