The US Federal Trade Commission reportedly plans to withdraw its case against Microsoft’s $69 billion acquisition of game publisher Activision Blizzard, bringing the Xbox maker another step closer to completing the deal.
FTC Secretary April Tabor ordered a hold Thursday on the case that was to be heard in front of an agency administrative law judge on Aug. 2, according to a report from Reuters. This comes a week after the FTC lost its appeal in federal court to temporarily block the Microsoft-Activision deal from proceeding until the commission’s administrative law process played out.
Microsoft first revealed plans to acquire Activision in January 2022. Closing the deal would turn Xbox maker Microsoft into one of the top three video game publishers, right behind rival Sony. Activision Blizzard is one of the largest third-party publishers, with some major franchises that would give a much-needed boost to Microsoft’s games catalog, including Call of Duty, Candy Crush and Overwatch.
Microsoft has until Oct. 18 to finalize its deal with Activision. The two companies moved the deadline to October from the original date of July 18, allowing more time to get approval from regulators. If the deal isn’t completed, there’s a termination, or “breakup,” fee that’s to be paid by Microsoft to Activision. The fee is at $3 billion but goes up to $3.5 billion on Aug. 29 and then $4.5 billion if the deal isn’t complete by Sept. 15. Microsoft President Brad Smith said in a tweet Wednesday that the companies are “confident about our prospects for getting this deal across the finish line.”
Though Microsoft has won a few merger-related battles, it still has hurdles to clear. Here’s what you need to know about the deal and what it means for gamers.
Who’s left to approve the deal?
Microsoft still needs to convince British regulators to sign off on the acquisition. In April, the UK’s Competition and Markets Authority blocked the $69 billion deal, saying it would result in higher prices and fewer choices for gamers.
Microsoft’s appeal to that ruling says the CMA “made fundamental errors in its calculation and assessment of market share data for cloud gaming services by failing to take account of constraints from native gaming (whereby gamers access games installed on their devices through a digital download or physical disc).”
The CMA will hold a reconsideration of the deal and will have a decision by the week of Aug. 7, according to Reuters.
In the US, the FTC has opposed the deal, saying the acquisition would hurt competition within the video game industry. But so far, its challenges have been unsuccessful.
Earlier this month, a federal judge declined to issue a preliminary injunction that would’ve paused the deal. The FTC was attempting to temporarily halt the merger until a separate, in-house administrative law proceeding played out. Now the FTC reportedly plans to put that in-house case on hold. In the past, the FTC has dropped opposition to deals if a federal judge has refused to grant an injunction.
Microsoft has continued to deny that the deal would hamper competition within the video game industry. It’s already received approval from the EU, China, Japan and other major countries.
What does this deal mean for gamers?
For Xbox Game Pass subscribers, a merger would mean Activision Blizzard’s catalog of games would be incorporated into the service, likely similar to how Bethesda games were when Microsoft acquired that company in 2020.
How gamers who don’t have an Xbox, and instead use a Sony PlayStation or Nintendo Switch console, would be affected is less clear. Critics of the deal are concerned that Microsoft could make future games developed by Activision unavailable on rival consoles. (Microsoft did this for games developed by Bethesda.) This is especially concerning for a major Activision title like Call of Duty.
Microsoft already agreed to a 10-year deal with Nintendo to bring Call of Duty games to its consoles, but Sony reportedly rejected a similar agreement when presented with it last year.
Sony is still against the acquisition and submitted filings to regulators about its concerns over the deal. On Sunday, Xbox boss Phil Spencer said Microsoft and Sony agreed to a 10-year “binding agreement” to keep Call of Duty on the PlayStation platform. It’s unclear if the newest arrangement was different than what Microsoft offered Sony last year.
Earlier this year, Microsoft made a 10-year agreement with Nvidia that ensures Nvidia’s cloud gaming platform GeForce Now continues to have access to games from both Microsoft and Activision.
Microsoft is using these agreements with its competitors to show regulators that there won’t be a lack of competition in the video game industry.