Microsoft's Acquisition of Activision Blizzard Temporarily Blocked by FTC
Microsoft and Activision Blizzard have been granted a „temporary restraining order” by a court in the United States. This is to prevent the companies from finalizing their merger prematurely.
The U.S. District Court for the Northern District of California has granted the request filed on monday by the U.S. Federal Trade Commission (FTC for short) and issued "a temporary restraining order" for Microsoft and Activision Blizzard.
This means that until 11:59 p.m. Pacific time on the fifth business day after the court's next ruling, the companies will not be able to finalize the $68.7 billion merger announced in January 2022.
Why such request?
- The FTC made the request based on signals sent by Microsoft and Activision Blizzard that the deal would be finalized by June 16 - well before August 2, when the Commission, the Redmond giant and Sony will meet in court.
- This is significant because in May the merger in question received - to the disbelief of the British Competition and Markets Authority (CMA), which opposes it - a green light from the European Commission. Microsoft, on the other hand suggested that acceptance to the deal on the Old Continent is enough to finalize it.
- Moreover, both companies are keen to strike the deal by July 18, 2023 at the latest. If this does not happen, it will be necessary to renegotiate the deal. In the event that the parties do not reach a renewed agreement, Microsoft would have to pay Activision Blizzard a $3 billion breakup fee.
What's next?
- The ruling, which is expected to be issued by the California court, could result in an injunction, under which the FTC will get a chance to present the case in the courtroom before the merger is finalized.
- The commission is trying to stop the deal because it fears that Microsoft's acquisition of Activision Blizzard will negatively affect competitiveness in the gaming industry.
- The Redmond giant has until June 16 to file an explanation (here, an objection). The FTC will then have four days - until June 20 - to submit its response. An evidentiary hearing on the matter will be held on June 22 and 23.
The best of a (not) bad bargain
Microsoft seems to be aiming for the best of a bad bargain. Though are they sure it's a bad one? A spokesman for the company, David Cuddy, commented the whole situation with the following words:
"Accelerating the legal process in the United States will ultimately result in greater choice and competitiveness in the game market. The 'restraining order' until the court makes a decision makes sense, especially since this one moves quickly."
In recent days, similar voices came from Brad Smith - vice chairman of Microsoft's board of directors - and Bobby Kotick, CEO of Activision Blizzard. One even gets the impression that both companies were just anxious to speed up the legal proceedings in the United States. But will this enable them to finalize the deal before July 18? We'll find out soon enough.
