Microsoft's Acquisition of Activision Cleared as FTC Drops Challenge

In a significant development for the gaming industry, the Federal Trade Commission (FTC) has withdrawn its challenge against Microsoft's $68.7 billion acquisition of Activision, following a Ninth Circuit decision that denied the FTC's motion for a preliminary injunction against the merger. The Ninth Circuit affirmed that the FTC failed to demonstrate the likelihood of its success on the merits according to the Clayton Act's stipulations, which require showing that a merger could substantially lessen competition or create a monopoly. The court highlighted that the cross-console nature of Activision's famed Call of Duty franchise, which is central to its market appeal, would not be threatened by the merger. This decision follows a previous ruling by Judge Corley of the Northern District of California, who had also dismissed the FTC's attempts to block the merger, citing benefits to consumer access and insufficient competitive harm. Post-merger, Microsoft had pre-emptively agreed to make Activision's games, including Call of Duty, available to competitors like Sony and Nintendo, indicating a strategic move to ease antitrust concerns. Activision's concessions and divestment in markets outside the U.S. further mitigated potential anti-competitive risks. Furthermore, the court rejected the FTC's concerns about potential anti-competitive behavior in the library subscription market, finding that Activision had not favored such a subscription model previously, and thus the merger was unlikely to disrupt market dynamics. Concurrently, a private class-action lawsuit challenging the merger was settled in October 2024, which, coupled with the FTC's decision to drop its case, signifies the end of legal battles surrounding this transformative merger.