FTC Loses Appeal in Microsoft–Activision Blizzard Case as Court Upholds $68.7bn Deal

The U.S. Federal Trade Commission (FTC) has lost its appeal against Microsoft’s $68.7 billion acquisition of video game publisher Activision Blizzard, a major blow to the agency’s efforts to curtail the power of Big Tech through antitrust enforcement.

In a ruling issued this week, a panel of judges from the Ninth U.S. Circuit Court of Appeals upheld a lower court’s earlier denial of a preliminary injunction that would have paused the deal.

The court concluded that “given the FTC’s failure to make an adequate showing as to its likelihood of success on the merits as to any of its theories, the district court properly denied the FTC’s motion for a preliminary injunction on that basis,” according to the opinion cited by Reuters.

The ruling affirms the decision by U.S. District Judge Jacqueline Scott Corley in July 2023, who rejected the FTC’s attempt to block the merger on the grounds that the agency did not demonstrate that the acquisition would substantially lessen competition in the gaming market. The next day, the FTC appealed the decision, but Microsoft and Activision closed the deal in October 2023, nearly two years after the merger was announced.

The FTC first sued to block the acquisition in December 2022, arguing that Microsoft’s control of Activision’s game content could give it the ability and incentive to “withhold or degrade Activision’s content in ways that substantially lessen competition – including competition on product quality, price, and innovation.”

At the heart of the FTC’s challenge was concern that Microsoft could make Activision’s blockbuster titles, such as Call of Duty, exclusive to its own platforms or otherwise disadvantage rival consoles and cloud gaming services. But the district court, and now the appeals court, found the FTC’s evidence lacking.

According to the appellate court’s summary, the FTC failed to show that Microsoft would probably foreclose rivals in a way that would harm consumers. The panel did not find adequate support for the theory that Microsoft’s ownership of Activision would reduce competition in the gaming console market, subscription-based gaming services, or emerging cloud gaming platforms.

While the acquisition has now cleared both the U.S. courts and regulatory scrutiny in the UK, after Microsoft made concessions to transfer cloud streaming rights to Ubisoft, the FTC’s administrative case against the merger technically remains ongoing.

“The deal is still the subject of an administrative proceeding that remains pending before the FTC,” the appellate opinion noted.

However, with the deal now closed and two court rulings against its motion to pause it, the FTC’s options appear increasingly limited.

The ruling underscores the uphill battle the FTC faces under Chair Lina Khan’s leadership as it seeks to challenge dominant technology companies through more aggressive antitrust enforcement. The Microsoft–Activision case joins other recent instances in which the agency has struggled to convince courts to halt large tech acquisitions.

Despite this setback, Khan has defended the agency’s posture, arguing that challenges are necessary even when success is uncertain, to ensure regulatory oversight keeps pace with industry consolidation. However, legal observers have pointed out that the FTC’s repeated losses in court may weaken its ability to influence future tech mergers.

The Microsoft–Activision merger remains the largest in the history of the gaming industry. Microsoft has said the acquisition will help it accelerate its cloud gaming strategy and broaden access to Activision titles. The company has pledged to keep Call of Duty available on rival platforms for at least ten years as part of agreements with competitors like Sony and Nintendo.

Microsoft did not issue a fresh comment following the latest ruling. The FTC also did not make a statement on whether it will continue its administrative challenge or accept the court’s judgment.