FTC’s Request for Preliminary Injunction to Block Microsoft’s Acquisition of Activision Blizzard Rejected by Judge

FTC’s Request for Preliminary Injunction to Block Microsoft’s Acquisition of Activision Blizzard Rejected by Judge

A federal judge has denied the Federal Trade Commission’s (FTC) request for a preliminary injunction to stop Microsoft from finalizing its acquisition of Activision Blizzard. This decision not only signifies a setback for the FTC, but also challenges FTC Chair Lina Khan’s approach to antitrust enforcement. While the ruling does not guarantee the deal’s approval, as the FTC can appeal and the UK’s competition enforcer has also expressed opposition, it highlights the obstacles that Khan’s enforcement strategy faces in the courts.

The FTC, under Khan’s leadership, has vigorously fought against the $68.7 billion merger, which represents one of their most significant endeavors thus far. Khan initially gained attention in antitrust circles for her criticisms of how antitrust enforcement overlooked potential abuses by tech giant Amazon. However, despite growing support for a different perspective on antitrust in the digital age among many members of Congress, the courts remain a significant challenge in implementing new theories about the accumulation and exploitation of power by online companies to suppress competitors.

Judge Jacqueline Scott Corley, in her ruling, stated that the FTC had not demonstrated a high likelihood of success in its administrative challenge of the merger based on its contention that the deal would substantially reduce competition. The FTC argued that Microsoft might restrict some games to its own consoles or diminish the gaming experience of Activision titles on rival platforms. Conversely, Microsoft assured that it would expand access to the games. Corley sided with Microsoft, stating that the evidence indicated increased consumer access to Activision’s content, including popular titles like “Call of Duty.” She also noted that the FTC failed to produce any documents contradicting Microsoft’s commitment to making “Call of Duty” available on other gaming platforms such as PlayStation and Nintendo Switch.

Although the ruling brings the companies one step closer to finalizing their merger by the July 18 deadline, the FTC retains the option to appeal, and the deal remains subject to opposition from the UK’s Competition and Markets Authority.

An FTC spokesperson expressed disappointment with the outcome and emphasized the perceived threat posed by the merger to open competition in cloud gaming, subscription services, and consoles. The FTC plans to announce its next steps in the coming days as it continues its fight to preserve competition and protect consumers.

This is not the first time that a judge has expressed skepticism towards the FTC’s antitrust enforcement theories under Khan’s leadership. Previously, a federal judge ruled against the FTC’s attempt to block Meta’s acquisition of virtual reality fitness app maker Within Unlimited, which the agency claimed would diminish competition in an emerging market. Despite these setbacks, Khan remains committed to pursuing similar cases against tech companies that will likely encounter resistance in the courts, with Amazon’s antitrust practices being a notable target.

Critics of the ruling quickly voiced their concerns, with Matt Stoller, director of research at the American Economic Liberties Project, arguing that Judge Corley had altered the interpretation of relevant merger laws. Stoller highlighted that the law states the government must prove that the acquisition’s effect could substantially reduce competition or lead to a monopoly, rather than the higher threshold set by Corley. Additionally, Stoller raised concerns about potential bias, citing Corley’s disclosure that her son works at Microsoft, albeit not in the gaming division.

Regardless of the criticisms, this ruling underscores the skepticism among judges towards Khan’s theories on how tech companies can exploit acquisitions in adjacent markets to harm competition. It is worth noting that this skepticism exists even when judges are appointed by the same president who selected Khan to lead the FTC.

With the progress of new digital competition laws stalled in Congress, overcoming judges’ skepticism towards novel interpretations of existing laws will likely remain the biggest challenge for antitrust enforcers moving forward.

US

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