WASHINGTON, July 12 (Reuters) – The U.S. Federal Trade Commission (FTC) said on Wednesday it was appealing a federal judge’s ruling that Microsoft (MSFT.O) could go forward with its $69 billion purchase of “Call of Duty” maker Activision Blizzard (ATVI.O).
Microsoft’s victory in court on Tuesday, and a subsequent climbdown by Britain’s competition authority, brought the tech giant two steps closer to finalizing its tie-up with Activision, Microsoft’s biggest deal ever.
Still, any outstanding regulatory hurdle makes it more likely that the agreement between Microsoft and Activision will expire on July 18 without the deal having been completed. After July 18, either company will be free to walk away from the deal unless they negotiate an extension.
The FTC’s court filing about the appeal gave no details, which will go before the Ninth Circuit Court of Appeals on the West Coast.
Microsoft said it would fight the appeal.
“We’re disappointed that the FTC is continuing to pursue what has become a demonstrably weak case, and we will oppose further efforts to delay the ability to move forward,” Microsoft President Brad Smith said in an emailed statement.
The FTC declined to comment further on the notice of appeal.
While the companies succeeded on Tuesday in shooting down an injunction in court against completing their deal, the judge left in place a stay preventing them from doing so until Friday, to give time to the FTC to appeal.
The FTC may request a stay from the appeals court stopping the deal from closing.
In her opinion, U.S. District Judge Jacqueline Scott Corley in San Francisco rejected the Biden administration’s argument the deal would hurt consumers by giving Xbox game console-maker Microsoft exclusive access to games including the best-selling “Call of Duty.”
Britain’s Competition and Markets Authority (CMA), which had opposed the transaction, said on Wednesday a restructured deal between Microsoft and Activision Blizzard could satisfy its concerns, subject to a new investigation.
‘MAY’ OR ‘WILL’?
U.S. legal experts disagreed over whether the FTC had good grounds for an appeal, with some saying that appeals courts tend to defer to judges on matters of fact, while others said Judge Corley may have erred in stating the standard for stopping a deal.
In her 53-page order, Corley said it was not enough for the FTC to argue “a merger might lessen competition – the FTC must show the merger will probably substantially lessen competition.”
Legal scholars questioned that standard, saying the U.S. antitrust law required the FTC to prove the proposed deal “may” harm competition, not that it “will.”
To address the FTC’s concerns, Microsoft agreed to license “Call of Duty” to rivals, including a 10-year contract with Japan’s Nintendo Co (7974.T), contingent on the merger closing.
When U.S. antitrust agencies lose merger challenges in court, appeals are rare.
That said, the FTC appealed a ruling more than 10 years ago when it lost its fight against Whole Foods’ purchase of Wild Oats. The agency settled with the companies before the appeals court made a decision.
Reporting by Diane Bartz; Editing by Diane Craft, Lincoln Feast and Muralikumar Anantharaman
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