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Microsoft’s Activision Blizzard acquisition update: Will it go through?


Microsoft is attempting to persuade regulators around the world to clear its $68.7 billion acquisition of Activision Blizzard — the biggest deal of its kind the gaming industry has ever seen.

Amid concerns about its effect on competition in the industry — particularly in the nascent cloud gaming market — and in the face of ardent lobbying against the deal by competitor Sony, the U.K.’s Competition and Markets Authority has decided to block the acquisition, a decision Microsoft and Activision have said they will appeal. The U.S. Federal Trade Commission said it would attempt to block the deal legally, but a federal judge has ruled in favor of Microsoft being allowed to close the deal. The European Union, meanwhile, has given the deal its seal of approval.

Here’s the latest on Microsoft’s plans to snap up Activision Blizzard.

FTC appeals court’s ruling on the acquisition

The Federal Trade Commission is not giving up on its opposition to Microsoft’s acquisition of Activision Blizzard. Late on Wednesday, July 12, the regulator filed an appeal against the court decision that the merger should be allowed to go ahead, but it will need the Ninth Circuit Court of Appeals to extend the temporary block on the deal, which is set to expire on Friday.

Microsoft president Brad Smith said, “The District Court’s ruling makes crystal clear that this acquisition is good for both competition and consumers. 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.”

Activision exec Lulu Cheng Meservey said, “The facts haven’t changed. We’re confident the U.S. will remain among the 39 countries where the merger can close. We look forward to demonstrating the strength of our case in court — again.”

The saga drags on, but the stakes over the next few days are high. If the appeals court doesn’t extend the temporary injunction against the deal past Friday, Microsoft will have a window of a few days to close the deal before its deadline on Tuesday July 18 — but it must also persuade the UK regulator, which remains opposed, to allow it. The Competition and Markets Authority has agreed to resume talks but warned that “discussions remain at an early stage” and any restructuring of the deal might just trigger “a new merger investigation.”

Microsoft and UK regulator return to negotiating table

Following the Tuesday July 11 U.S. court ruling in favor of Microsoft being allowed to complete the acquisition of Activision Blizzard, Microsoft and the U.K.’s Competition and Markets Authority — the only remaining blocker to the deal — have agreed to put legal action on hold and see if a compromise can be worked out.

“While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA,” Microsoft president Brad Smith said in a statement. “In order to prioritize work on these proposals, Microsoft and Activision have agreed with the CMA that a stay of the litigation in the UK would be in the public interest and the parties have made a joint submission to the Competition Appeal Tribunal to this effect.”

With the U.K. now isolated in its opposition to the deal, Microsoft presumably feels in a strong position to restart talks. Its appeal against the CMA’s decision, due to go before the Competition Appeal Tribunal in late July, will be put on hold, and Microsoft may well be hoping it can resolve matters quickly without having to extend the July 18 deadline on the deal.

But it will need to offer the CMA something. CNBC reports that this is already done and “Microsoft and the CMA have agreed on a small divestiture,” meaning carving out a part of either Microsoft or Activision’s business — perhaps Microsoft’s cloud gaming operation in the U.K.

U.S. judge gives the deal the green light

Judge Jacqueline Scott Corley decided on July 11 that Microsoft should be allowed to complete its acquisition of Activision Blizzard before its July 18 deadline, ruling against the FTC’s request for a block until it had completed its own administrative case against the deal. This effectively renders the FTC toothless, and means it is unlikely to see its case through. Read our full report.

The focus now switches to the block of the deal now in place in the U.K. Microsoft and Activision have said they intend to appeal the Competition and Markets Authority’s decision, but may need to extend the deadline on their deal to do so.

Sony says it wouldn’t tell a Microsoft-owned Activision Blizzard about the next PlayStation

In a deposition for this week’s federal court hearing on the Activision Blizzard deal — as reported by Axios’ Stephen Totilo — PlayStation chief Jim Ryan stated that Sony would feel unable to share confidential details of its next console with developers at Activision Blizzard if the company were bought by Microsoft. “We simply could not run the risk of a company that was owned by a direct competitor having access to that information,” Ryan said, arguing that Activision Blizzard would then be disincentivized from making games that take advantage of a new PlayStation’s unique features.

In the deposition, Ryan is asked about how Sony worked with Minecraft developer Mojang after its acquisition by Microsoft, but this exchange has mostly been redacted.

It seems that, in the court hearing, the FTC is returning to arguments centered on competition with PlayStation in the console market, even though the U.K. regulator ultimately dismissed these concerns and framed its rejection of the deal around competition in cloud gaming instead.

The hearing begins today in San Francisco, and will only determine if Microsoft will be legally blocked from completing the acquisition until the FTC has concluded its deliberations on the deal in its own administrative court. Despite this limited scope, Microsoft will likely go in to the hearing with all its legal guns blazing, and treat it as its last, best chance to argue for the deal to go through.

U.S. judge temporarily blocks the deal

Late on Tuesday, June 13, a U.S. judge temporarily granted the FTC’s request for a block on Microsoft’s acquisition of Activision Blizzard. According to Reuters, Microsoft could theoretically have closed the deal as early as Friday, June 16, but will now have to wait for a hearing scheduled for June 22-23 in San Francisco.

At the hearing, the federal court will decide if the deal should be blocked until the FTC has concluded its case against the deal in its own administrative court, which it sued for back in December. The administrative hearing is set to begin in early August, but the FTC needs the backing of a federal court to actually enforce a stop on the deal — its administrative court doesn’t have the power to do that.

If the federal court agrees to block the deal further until the administrative case has concluded, that will mean the deal won’t make its July 18 deadline, potentially costing Microsoft enormous sums in financial penalties.

Microsoft repeated its comments in favor of the federal hearing from earlier in the week, saying, “accelerating the legal process in the U.S will ultimately bring more choice and competition to the gaming market. A temporary restraining order makes sense until we can receive a decision from the court, which is moving swiftly.”

U.S. FTC sues to stop the deal with an injunction

In addition to a lawsuit filed in December to block the deal, the Federal Trade Commission on June 12 requested a restraining order and injunction in federal court to stop the deal from going through before its July 18 deadline.

The FTC has already sued to kill the deal; the injunction it now seeks would stop any merger or acquisition activity altogether. The FTC’s filing says it needs the injunction to allow the commission the “opportunity to adjudicate the merger’s legality in an administrative proceeding.”

In a statement also made on June 12, Microsoft’s president, Brad Smith, said, “We welcome the opportunity to present our case in federal court. We believe accelerating the legal process in the U.S. will ultimately bring more choice and competition to the market.”

EU approves the deal, says it will improve cloud gaming

Confirming earlier reports, the European Commission, the governing body of the European Union, said on May 15 that it has approved Microsoft’s acquisition of Activision Blizzard. Announcing the decision of its antitrust regulators, the Commission noted the commitments offered by Microsoft in support of the deal represented “a significant improvement for cloud gaming as compared to the current situation.”

This puts the EU at loggerheads with the U.K. regulator, which has decided to block the deal specifically over its concerns that it would harm competition in the young, growing cloud gaming market. The EU said that Microsoft’s deals to make Activision Blizzard’s games available on other cloud gaming providers had fully addressed its concerns.

It’s a big win for Microsoft, but the tech giant is still unable to complete its deal without the approval of the UK’s Competition and Markets Authority. At the least, however, it will give Microsoft’s lawyers more ammunition as they prepare to appeal the CMA’s decision.

Microsoft says Activision deal block is “darkest day” of doing business in the UK

Microsoft president Brad Smith has made clear the depth of the tech giant’s anger at the blocking of its acquisition of Activision Blizzard by U.K. regulator the CMA. In an interview with the BBC, Smith said Microsoft’s confidence in doing business in the country was “severely shaken” and suggested it would be looking at doing more business in the European Union — a message presumably meant to butter up EU regulators, who have yet to report their findings on the deal, as well as stir up the politically sensitive issue of Brexit in the U.K.

The decision is “bad for Britain” and the “darkest day in our four decades in Britain,” Smith said. “It does more than shake our confidence in the future of the opportunity to grow a technology business in Britain than we’ve ever confronted before. People are shocked, people are disappointed, and people’s confidence in technology in the U.K. has been severely shaken. There’s a clear message here – the European Union is a more attractive place to start a business than the United Kingdom.”

UK regulator decides to block deal over cloud gaming concerns

In an announcement that came as a surprise to observers, and especially Microsoft and Activision Blizzard, the U.K. Competition and Markets Authority concluded its review of the acquisition on April 26 with a decision to block the deal. The CMA, which recently set aside its concerns about the effect of the merger on the console market, said the decision was based on its feeling that the deal would inhibit competition in the small but fast-growing cloud gaming market. Microsoft and Activision Blizzard immediately pledged to appeal the decision. Read our full report.

South Africa approves the acquisition

On April 17, South Africa’s Competition Commission became the latest international regulator to approve the deal. It said it had “found that the proposed transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant markets.” As per usual, the Commission’s main concern had been about the possibility of Call of Duty being made exclusive to Xbox, but it was satisfied by the deals Microsoft had made to keep the series available on other platforms — and in any case, it felt that Microsoft would not have the “ability and incentive to foreclose competing game distributors, particularly Sony and Nintendo.”

Here’s a list of all the countries that have approved Microsoft’s acquisition of Activision Blizzard so far:

  • South Africa
  • Japan
  • Chile
  • Brazil
  • Saudi Arabia
  • Serbia

UK regulator sets aside concerns about Call of Duty

In what could be a decisive tipping point for Microsoft’s chances of completing its deal, the U.K. regulator — previously thought to be the most likely to block the acquisition on anticompetitive grounds — has indicated it is setting aside some of its main concerns, specifically around Call of Duty. The Competition and Markets Authority said March 24 that new data analysis indicated that making Call of Duty exclusive to Xbox would not be in Microsoft’s interest.

In an update to its provisional findings, the CMA said, “We have now provisionally concluded that the merger will not result in a substantial lessening of competition in console gaming services because the cost to Microsoft of withholding Call of Duty from PlayStation would outweigh any gains from taking such action.” The CMA said that its updated view was that making Call of Duty exclusive to Xbox would be “significantly loss-making” and that “Microsoft will instead still have the incentive to continue to make the game available on PlayStation.”

The regulator noted that its change in stance related only to consoles, and that it still had concerns about the deal’s effect on the cloud gaming market. Its full verdict is due by the end of April.

Microsoft pushes hard at EU meeting, converts Nvidia, but Sony won’t budge

Microsoft used every means at its disposal on Tuesday, Feb. 21, to push its acquisition of Activision Blizzard forward. It announced it had signed a deal with Nvidia to make Xbox PC games, including Activision Blizzard titles like Call of Duty, available on the GeForce Now cloud gaming service, a direct rival to its own Xbox Cloud Gaming. This is the first step Microsoft has taken to calm regulators’ concerns about it establishing a stranglehold over the cloud gaming market, as opposed to the availability Call of Duty on rival consoles.

Microsoft also attended a meeting with European Union regulators in Brussels, Belgium, at which competitors, including Sony, were present. Media were then summoned to a press conference where Microsoft vice chair and president Brad Smith passionately made the case for the deal; you can get a good sense of this event from Eurogamer’s report. Smith rammed home Sony’s dominance in the console market, characterizing the split in global market share between PlayStation and Xbox as 70:30.

At one point, Smith theatrically produced an envelope which, he said, contained the 10-year contract, similar to Nintendo’s (see below), that has been offered to Sony. “I’m ready to sign it at any time,” Smith said, in a direct challenge to PlayStation boss Jim Ryan — and an invitation to regulators to see Microsoft’s openness and flexibility. (Though he did draw the line at the U.K. regulator’s suggestion that the Call of Duty business be sold off.)

The substance of the actual meeting, at which Ryan was present, as well as Xbox boss Phil Spencer and Activision Blizzard CEO Bobby Kotick, remains private. But all sources indicate that Ryan is unmoved, and Sony remains committed to its attempt to block the deal outright. At the press conference, Smith pointed out Microsoft’s long experience in getting deals like this done. It seems Sony is willing to test that to the limit.

Microsoft finalizes deal to bring Call of Duty to Nintendo for 10 years

Microsoft has confirmed that it has signed a “binding 10-year legal agreement” to put Call of Duty on Nintendo platforms on “the same day as Xbox, with full feature and content parity.” Microsoft vice chair and president Brad Smith announced the deal on Twitter.

“We are committed to providing long-term equal access to Call of Duty to other gaming platforms, bringing more choice to more players and more competition to the gaming market,” Smith’s statement read. His wording, and the agreement itself, are clearly aimed at regulators deliberating over Microsoft’s proposed acquisition of Activision Blizzard, among whom the accessibility of Call of Duty to other platforms has been seen as a key issue. The deal will bring Call of Duty back to Nintendo consoles for the first time since 2013.

The contract was first announced in December, alongside a similar offer to Steam; at the time, Valve boss Gabe Newell waved the offer aside, saying his trust in Microsoft and its gaming chief Phil Spencer was so deep that such a contract wasn’t necessary, and that he believed it was in Microsoft’s interest to keep Call of Duty widely available anyway. Microsoft says it has made the same offer to Sony, but the PlayStation platform holder is presumably holding out, preferring to plead with regulators to kill the deal entirely.

War of words gets uglier as Sony accuses Microsoft of “harassment” and Activision accuses Sony of “sabotage”

The wrangling over Microsoft’s acquisition of Activision Blizzard has entered a testy phase. In court documents responding to Microsoft’s subpoena of internal Sony documents (see below), Sony’s lawyers have accused Microsoft of “obvious harassment” — in particular for requesting performance reviews of Sony executives. That’s according to Feb. 9 reporting by Axios and Kotaku. “This is not an employment case,” Sony said.

Meanwhile, controversial Activision Blizzard chief Bobby Kotick has come out swinging after a couple of years in stealth mode. Just after telling MSNBC that blocking the deal would turn the U.K. into “Death Valley,” Kotick told the Financial Times that Sony was “trying to sabotage” the deal and that Sony leadership was refusing to return calls from Microsoft and even Activision itself. Of course, Sony and Activision are close partners on the PlayStation version of Call of Duty, among other things. Kotick says the idea that Microsoft would not support Activision games on PlayStation is “absurd.”

Things are clearly getting a little heated as the three biggest governments’ regulators line up against the deal. But, interestingly, analysts at Wedbush Securities reckon it’s all just hot air. In a note to investors (as reported by VGC), Wedbush’s Nick McKay and Michael Pachter said that the U.K.’s CMA, and the other regulators, are maneuvering to look tough and extract concessions from Microsoft because they know they have “a losing legal argument,” and the merger is in fact “close to being approved.” In other words, it’s all a political game of double bluff. It’s enough to make your head spin.

FTC reportedly filed suit early to try to head off a settlement approving the deal in Europe

Bloomberg reports that the U.S. Federal Trade Commission filed its lawsuit attempting to block the deal much earlier than expected, as it was trying to head off a potential agreement between European regulators and Microsoft that would see the deal waved through. Political intrigue intensifies!

According to Bloomberg’s sources, the FTC had not expected to file suit until the spring, but did so in December on the very same day it had learned from EU regulators that they were preparing to negotiate a compromise with Microsoft. Apparently the FTC wanted to get ahead of the European Commission, set the terms, and avoid a situation where it could be bounced into rubber-stamping the acquisition.

Microsoft subpoenas Sony as it prepares to defend itself against the FTC’s case

According to Axios’ Stephen Totilo, Microsoft subpoenaed Sony on Jan. 17, asking it to hand over internal information to help it build its defense against the lawsuit the Federal Trade Commission is bringing against its acquisition of Activision Blizzard.

Given the extent to which the FTC’s case, along with other regulators’ concerns, rest on Sony’s complaints that its competitive position will be weakened by its console rival acquiring Call of Duty and other Activision Blizzard games, it seems likely that Microsoft wants some internal data that will help them dispute this claim — perhaps Sony’s release or development schedule, or some sales or engagement data. Sony, for its part, will try to limit how much sensitive information it has to share with its competitor, but by pushing so hard for regulators to block the deal, it did open itself up to this kind of exposure.

Microsoft says it hopes to bring its pro-union approach to Activision Blizzard

On Jan. 6, as reported by The Verge, Microsoft ran an ad in the Washington Post highlighting its acceptance of unions, co-signed by the Communication Workers of America union. “As we enter a new year, we remain committed to creating the best workplaces we can for people who make a living in the tech sector. When both labor and management bring their voices to the bargaining table, employees, shareholders and customers alike benefit,” the note reads. Then it adds: “During 2023, we hope to bring the same agreement and principles to Activision Blizzard, which Microsoft has proposed to acquire.”

This is certainly a pitch to the FTC that Microsoft can improve working conditions at Activision Blizzard, which has shown resistance to a move to unionize among its employees after the dreadful scandal about its workplace culture in 2021. The ad highlights the successful unionization of 300 Bethesda and ZeniMax workers after Microsoft’s acquisition of that company, and concludes by saying, “We aren’t asking the FTC to ignore competition concerns. On the contrary, we believe it’s important to explore solutions that protect competition and consumers while also promoting the needs of workers and economic growth and American innovation.”

What happens next?

The next major deadline is the federal hearing on whether the deal should be blocked while the FTC conducts its case against it, which is set for June 22-23.

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