The Circus Continues: FTC Appeals Its Loss Against Microsoft Over Activision-Blizzard Acquisition
The Federal Trade Commission (FTC) was unsuccessful in its attempt to obtain a temporary injunction blocking
Microsoft's acquisition of Activision-Blizzard. Federal judge Jacqueline Scott Corley denied the petition earlier this week, allowing Microsoft to proceed with the acquisition by July 18th.
There was speculation that the FTC
might drop its lawsuit entirely, but surprisingly enough, the FTC is appealing the federal judge's decision and has filed an
opposition to the judge's ruling. The FTC has lodged its appeal in the Ninth Circuit Court and is once again seeking
to halt the deal.
In its appeal, the FTC has claimed the judge made several judgemental mistakes. Various
objections raised by the FTC can be summarized as:
- Aplying an incorrect legal standard to the FTC's request for a preliminary injunction.
- Making a legal mistake by finding that Microsoft was likely to impede competition in the market for multi-game subscription library services, while also concluding that the benefits to Microsoft's GamePass customers outweighed any potential harm.
- Erroneously relying on Microsoft's offers and agreements with competitors to dismiss the FTC's concerns about incentives.
- Making reversible errors in the court's analysis of potential foreclosure.
- Misapplying the law and disregarding the evidence presented by the FTC regarding incentive to impede competition.
- Making a reversible error by acknowledging conflicting evidence on the anti-competitive effects of the merger but ruling that the FTC had not proven a likelihood of success on the merits.
- Misjudging the balance of equities.
Microsoft has requested the court to dismiss FTC's motion. In the preliminary response, Microsoft stated:
The Federal Trade Commission (“FTC”) has asked the Court to enjoin the merger of Microsoft Corporation (“Microsoft”) and Activision Blizzard, Inc. (“Activision”) pending appeal, notwithstanding the Court’s July 10, 2023 order denying the FTC’s request for a preliminary injunction. Dkt. 313. Due to the compressed deadline—an exigency created by the FTC’s delay first in bringing this case1 and then further delay in seeking the instant relief— Defendants provide the following preliminary response setting forth why the Motion can and should be summarily denied. If the Court desires further briefing, Defendants stand ready to provide it on whatever timetable would aid the Court’s consideration.
The decision now rests with the judges in the Ninth Circuit Court of Appeals. If the appeal is granted
and the lower court ruling is overturned, it could potentially derail Microsoft's plan to acquire Activision-Blizzard.
However, if the Ninth Circuit Court rules against the FTC, it could pave the way for the deal to be finalized as early
as this weekend. It is worth noting that the NASDAQ stock market has announced to de-list Activision-Blizzard before
trading begins on July 17, 2023 and replacing it with another company.
Analysis
This case exemplifies the issue of accountability. Microsoft's acquisition of Activision-Blizzard was announced in February 2022, providing the FTC with over a year to build a strong case against it. However, the FTC not only delayed filing their lawsuit but also performed poorly during the five-day trial for the temporary injunction. The decision to appeal can be seen as a last-ditch effort by the FTC to salvage their credibility. Unfortunately, in this case, the FTC has failed to demonstrate a commitment to protecting consumer rights and instead appeared more aligned with the interests of Sony, almost functioning as an extension of their legal team.
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