Context: On January 18, 2022, Microsoft announced an agreement to acquire Activision Blizzard, also referred to as Activision Blizzard King (ABK; King being the Candy Crush maker). The regulators in many jurisdictions cleared the deal either on the fast track or after an in-depth investigation. In the special case of the UK Competition & Markets Authority (CMA), it took a modified deal to secure approval, further to which the deal closed in October 2023. The only other regulator to impose conditions was the European Commission (EC). But in the United States, the Federal Trade Commission (FTC) unsuccessfully tried to block the transaction. Earlier this month, the United States Court of Appeals for the Ninth Circuit affirmed a mid-2023 decision by Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California to deny the FTC a preliminary injunction (PI) against the consummation of the deal (May 7, 2025 games fray article). A proceeding within the FTC had been put on hold and was supposed to start 21 days after the decision. The FTC and Microsoft agreed to push it back to July 21, 2025.
What’s new: Yesterday, FTC Secretary April Tabor filed an order by the Commission (the FTC’s leadership) to withdraw its administrative complaint against the acquisition (PDF).
Direct impact: That decision, in conjunction with the Ninth Circuit decision that the FTC accepts, puts a definitive end to the U.S. regulatory process surrounding the $69B transaction. It would have been highly unlikely at any rate that the FTC could have obtained a court ruling (given that Microsoft would undoubtedly have appealed an adverse FTC decision) mandating the divestirue of ABK. Technically, a review may still be pending in one country: the Competition Bureau of Canada (CBC) supported the FTC even in the mid-2023 PI proceedings and neither blocked nor cleared the deal. But there is no way that the CBC would try, much less at this stage, to force Microsoft to divest ABK.
Wider ramifications: The FTC rightly notes in its decision that this matter was not the best use of its resources. There are other issues, in the technology sector and elsewhere, that warrant regulatory attention and intervention, unlike a long-shot attempt to force the undoing of a merger that never was and in fact has not turned out to be anticompetitive. The Trump Administration showed that it was, in principle, prepared to honor the predecessor administration’s decision to challenge the merger, but within reason. The Ninth Circuit ruling, which did not move any of the relevant goalposts in the FTC and its sister agency’s (DOJ Antitrust Division) favor, apparently dissuaded the decision makers from spending more time and energy on this matter. But regardless of what party governs the country, the stiff (even if unsuccessful at all stages) resistance that the FTC mounted was a clear signal to acquirer, especially to large technology companies, that the regulatory environment is more complicated now than it was even just five years ago.
Procedural history
Between January 18, 2022 (the day the deal was announced) to May 22, 2025 (the day the FTC finally dropped its December 2022 administrative complaint), there were 1,220 days (including the start date, but not the end date); or 3 years, 4 months and 4 days; or 40 months and 4 days.
Obviously, the FTC’s merger unit became aware of the deal the day it was announced, and from what became known as a result of the FTC’s unsuccessful litigation, Microsoft and ABK reached out rather quickly. Under the applicable statute, the FTC would have had very little time to form a decision on whether to seek a preliminary injunction. Microsoft and ABK gave the agency a lot more time, but in late 2023, a decision had to be made. At that point, then-chair Lina Khan (who rightly criticized previous underenforcement of the antitrust laws in other contexts) failed to see that this particular merger did not raise any serious issues and decided to sue. Rumor has it that the FTC, which was closely coordinating with the UK CMA at the time, was worried about a potentially impending agreement between the deal parties and the EC on conditional clearance, and sought to dissuade its Brussels-based counterpart from greenlighting the transaction. They apparently hoped that the EC would not want to look soft. It is unclear to what extent the EC was influenced by such considerations. It clearly did not shy away from granting clearance in mid-May 2023, within a couple of weeks of the CMA’s original decision to block the deal (which the CMA corrected later, based on a modified deal structure with respect to cloud gaming rights).
Not long after EU clearance, Microsoft and ABK informed the FTC that they were now (regardless of a UK blocking decision) reserving the right to close the transaction anytime. At that point, the FTC had to go to court and seek a PI, or it would have waived the right to do so. Its own in-house proceedings were still going to take much longer. The original trial date was in the summer of 2023, with the Administrative Law Judge (ALJ) having about four months to write a decision.
Judge Corley denied the PI in mid-2023. The FTC ran to the Ninth Circuit and asked for an emergency intervention, which was denied; then for an intervention that would have blocked the deal for the duration of the appeal, which was also denied; and kept pursuing its appeal even after the deal closed in October 2023. The Ninth Circuit held the appellate hearing on December 6, 2023, and then took its time before finally handing down a decision 16 months and 1 day after the hearing (which was unusually long, but the unanimous decision was clear and concise). That decision was not about whether the merger was lawful, but about whether the FTC had raised, at the time of the mid-2023 decision, a sufficiently serious question to warrant a PI. The FTC’s PI motion fell short of that requirement, which allows the reasonable inference that it never had a strong case to block (or, at this stage, undo) the merger.
One last procedural loss for the FTC’s litigation team
It is only one final anecdote from the drawn-out process, but worth nothing that the FTC’s litigators were once again unable to persuade a judge (as they previously failed to convince Judge Corley) that Microsoft’s procompetitive agreements with rival console makers Sony and Nintendo as well as various rival cloud gaming providers (NVIDIA, Boosteroid, Ubisoft etc.) should be ignored in the analysis:
The Ninth Circuit did not have to reach that question in its decision because it held that there was no issue to be addressed in the first place, so there was no need to look into whether any hypothetical issue was potentially cured by one or more remedial agreements.
From a policy point of view, regulators should actually encourage companies to identify, contractualize and implement solutions that work — and that benefit consumers.
Lina Khan and MAGA
The competition policy landscape is way more nuanced and complex than in the old days where Republicans clearly favored a hands-off approach while Democrats advocated interventionism. Some of Lina Khan’s are shared by certain top Republicans.
It would be inaccurate and unfair to attribute yesterday’s overdue decision to the outcome of last year’s presidential election, except that if Lina Khan had stayed in office, it’s quite possibly that she would not have been prepared to recognize her error even at this juncture. However, if Democrats had appointed a different FTC chair, the outcome could easily have been the same. Anyone who was not emotionally invested in this matter could easily see that his was legally a losing case and that the case was, if not anticompetive. If anything, its effects have been procompetitive as the next (and final) section of this article explains.
Good for gamers
Any fears that Microsoft would distort competition in the video game console business (Xbox), the multi-game subscription library business (Game Pass), the cloud gaming business (xCloud) or whatever combination of markets were unfounded. If the objective was just to show that any major acquisition by a large technology company would draw protracted regulatory scrutiny and legal challenges, then the facts and the law may not matter anyway. That may have been the attitude of at least some people.
Xbox has not grown at the expense of other consoles: its market share is lower now than it was before the deal. In fact, many Xbox fans had hoped that Microsoft would strengthen that platform through more first-party exclusive content, but it did not happen. Instead, post-merger Call of Duty releases on the PlayStation (Modern Warfare III in November 2023 and Black Ops 6 in October 2024) became extremely popular.
There are no signs of distortion in the subscription services or cloud gaming markets either. In June 2024, which was about nine months after the closing of the merger, more than 200K different gamers played Activision Blizzard games on non-Microsoft streaming services. That was 150 million hours of streaming, and there was no such option prior to the deal. Activision never really warmed up to cloud gaming or multi-game subscription services while it was an independent company.
Microsoft said initially that the purpose of the deal was to bring more games to more gamers. There has been zero evidence of access to games becoming restricted as a result of the acquisition, but plenty to the contrary.
Apart from the clarity of the Ninth Circuit decision, the FTC also made the right call from a competition and innovation policy point of view.
Since games fray launched in December 2023 (simultaneously with ai fray and ip fray), the FTC litigation over the ABK deal has been one of the top two topics (the other being the Nintendo v. Pocketpair patent dispute). But that process could (and actually should) have ended a lot sooner.
Florian Mueller
games fray does not cover all games industry issues. We focus on only a very few litigation and regulatory topics where we believe in-depth analysis complements the work done by industry media. Sometimes we don’t publish an article in a month or more. We’re fine with that if we believe that our coverage would merely be duplicative of what others are already doing. But when a complex high-stakes issue comes along, we try to provide insights to those who take a particularly strong interest in the factual, legal and policy issues surrounding such cases and processes.
(Founder & Publisher of games fray)