US judge turns down challenge to Microsoft merger with Activision

Judge rejects challenge to $69bn acquisition in a blow to efforts to crack down on economic consolidation in tech sector.

A Microsoft logo with a screenshot from a Call of Duty video game in the background
Under the administration of US President Joe Biden, federal regulators have turned a sceptical eye towards mergers that could stifle competition in tech [File: Richard Drew/AP Photo]

A United States judge has declined to block the tech giant Microsoft from acquiring the video game producer Activision — a setback for the administration of US President Joe Biden, which has sought to limit consolidation in the tech sector.

In a ruling on Tuesday, District Judge Jacqueline Scott Corley turned down a bid by the Federal Trade Commission (FTC) to temporarily halt Microsoft’s $69bn takeover of the video game company.

“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” said FTC spokesperson Douglas Farrar. “In the coming days, we’ll be announcing our next step to continue our fight to preserve competition and protect consumers.”

The ruling represents a victory for Microsoft and a blow to federal regulators pursuing anti-trust cases.

Under the Biden administration, the FTC, helmed by Lina Khan, has taken a tougher stance against potentially monopolistic activities from tech giants such as Amazon, Google owner Alphabet and Meta, the parent company of Facebook.

The federal regulatory agency had asked Corley to issue a temporary injunction until the agency’s in-house judge could review the merger in August.

The FTC had argued that the deal would give Microsoft control over Activision games like Call of Duty, potentially restricting their use on consoles from rival brands.

During the five-day trial, which took place in June, Microsoft CEO Satya Nadella said that the company would have no incentive to restrict the use of Activision games on other consoles.

Corley sided with the tech firms, stating that the FTC had failed to demonstrate that the deal would hurt competition.

“FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition,” Corley’s ruling reads. “To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content.”

The European Union also approved the merger in May, though regulators in the United Kingdom have moved to block the deal and will consider proposals to restructure it.

Activision shares shot up by about 5.6 percent following the news, and Microsoft President Brad Smith stated that he was “grateful” for a “quick and thorough decision” in a post on Twitter.

Source: Al Jazeera and news agencies