A federal appeals court on Wednesday rejected the Federal Trade Commission’s (FTC) legal challenge to Microsoft’s $69 billion acquisition of “Call of Duty” maker Activision Blizzard.
The 9th U.S. Circuit Court of Appeals, based in San Francisco, upheld a lower court’s decision, ruling that the FTC had not met the requirements for a preliminary injunction to block the deal, which was finalized in 2023.
The three-judge panel unanimously concluded that the lower court had correctly applied the legal standards and determined that the FTC had not demonstrated a strong likelihood of success in proving that the merger would reduce competition.
The FTC, which enforces antitrust laws, filed the lawsuit in 2022, seeking to prevent the acquisition on the grounds that it would harm competition, particularly in the console gaming and cloud gaming markets. The agency argued that the merger would strengthen Microsoft’s position against rivals in both the Xbox console and subscription-based gaming sectors.
However, U.S. District Judge Jacqueline Scott Corley ruled in July 2023 that the FTC failed to show how the deal would substantially lessen competition in these markets. Following the lower court’s decision, the FTC sought an appeal, arguing that the court had applied an excessively strict standard in assessing whether the injunction should be granted.
The FTC’s lawsuit was part of a broader effort to challenge the merger, which also faced scrutiny from competition authorities in the UK and other international markets. In the UK, the deal was approved, paving the way for the acquisition to close in late 2023.
The transaction, which remains the largest-ever acquisition in the video game industry, will see Microsoft expand its gaming portfolio and enhance its cloud gaming and subscription services. Microsoft did not immediately respond to requests for comment following the ruling.
The FTC’s administrative action against the deal has been paused while the appeals court decision was pending.
