Key Takeaways
- A US Judge has ruled that the FTC doesn’t have an antitrust against Microsoft in their proposed takeover of Activision Blizzard
- With the restraining expiring tomorrow, it’s looking like the transaction will be finalized soon
- The FTC has lodged a last minute appeal against the decision
It seems we’re at the stage now where the biggest tech companies are so big, that every time they look to make an acquisition, the regulators aren’t too happy. And it’s not just the US regulators companies like Microsoft and Amazon need to worry about either, with watchdogs from all over the world potentially able to throw out a deal if they believe it will harm competition.
That’s the fight that’s been going on with Microsoft’s proposed takeover of Activision Blizzard. And it’s been going on for some time, with Microsoft first announcing it’s plans to absorb the gaming company way back in January 2022.
So it’s an issue that’s been working its way through the courts for around 18 months already. And it looks like it’s not done yet. This week a US judge rule against the FTC in their case to block the transaction, however by Wednesday the FTC had already lodged an appeal of that decision.
Let’s get into the details.
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The Microsoft/Activision Blizzard deal
In January 2022, Microsoft made a straight up cash offer to buy Activision Blizzard for $68.7 billion. If you’re not exactly sure what Activision Blizzard do, or maybe you know they’re a gaming company but you’re not sure how big they are, this would be a big deal for Microsoft, and specifically for Xbox.
Some of the titles under Activision Blizzard’s banner include Call of Duty, Warcraft, StarCraft, Overwatch, Candy Crush, Crash Bandicoot and Tony Hawk’s Pro Skater.
The takeover would see Microsoft Gaming becoming the third largest gaming company in the world, behind only Tencent and Sony.
While there are many high profile titles up for grabs in the takeover, the biggest win for Microsoft (and the biggest potential sticking point for the competition regulators) would be the acquisition of the Call of Duty franchise.
There are 19 games in the main Call of Duty series, and with total sales of over 425 million units, it’s the most popular first person shooter of all time, fourth most popular gaming series of all time, behind only Mario, Pokemon and Tetris.
Outside of the main console and PC versions of the game, there are dozens of handheld, mobile and free to play versions of the game, plus merchandise and even potential film franchises in the works.
The regulators take on the deal
And it’s Call of Duty that has been the main concern of the US Federal Trade Commission (FTC) and the UK’s Competition and Markets Authority (CMA). At the moment, Call of Duty isn’t exclusive to any one piece of hardware, meaning gamers can play it on Playstation, Xbox and PC.
There has been vocal concern among gamers, and Sony, that Microsoft would look to make Call of Duty games exclusive to Xbox in the future, in a move that they believe would be anti-competitive.
If you’re not sure why that’s a problem, fair trade is a central component of the typical market economy. Without some checks and balances it would allow the biggest companies to muscle out the competition, leaving consumers far worse off in the long run.
If you’re not a gamer it may not seem like a big deal, but imagine we’re talking about grocery stores instead. If Kroger’s were to buy up every other grocery chain in the country, or at least most of them, they would have an effective monopoly on the grocery market. With that much power, they’d be able to raise prices as much as they wanted, and consumers wouldn’t have any choice but to pay them.
The concept is the same in all industries, and it’s the regulators job to keep the playing field relatively level.
Judge throws out the FTCs complaint
But with all that said, this week a US judge has dismissed the complaint and confirmed that the deal can go through.
US District Judge Jacqueline Scott Corley stated that the FTC hadn’t done enough to show her that “the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets”.
Microsoft has stated that they plan to continue to license the game to Sony for the foreseeable future, but made no promises that it wouldn’t become an Xbox exclusive at some point.
At the same time, the UK’s CMA has softened their stance on the transaction, pausing their legal action and stating that they are prepared to open discussions with Microsoft about how the deal might be modified to address their concerns.
The European Commission approved the deal back in May, which now clears the way for the transaction to take place
FTC has appealed the decision
But Microsoft wasn’t out of the woods for long, as just 24 hours after Judge Corley handed down her decision, they announced they’d be making an appeal. They’ll be working on borrowed time, as a restraining order stopping the deal from being completed expires tomorrow, meaning that unless the FTC gets a last minute extension, Microsoft will be able to finalize the transaction.
At this stage, it’s looking highly likely that the deal will finally go through.
The bottom line
Antitrust issues are just par for the course for the world’s biggest companies, but they can still be a thorn in the side of growth. Acquisitions are important for investors to watch, because the right purchase can drive huge value for a stock for the foreseeable future.
You just have to look at companies like Meta, who’ve acquired companies like Instagram and WhatsApp, or Disney’s purchases of Marvel, Pixar and Star Wars, to see how powerful the right buy can be.
As we’ve seen from this deal, the investing world is global now, with regulators and markets in places like Europe and Asia important considerations for businesses and investors. Ignoring overseas assets isn’t a good idea, but it can be confusing.
That’s why we’ve created the Global Trends Kit, which uses the power of AI to predict the performance of a wide range of assets, including stocks, bonds, forex, and even commodities like oil and gold.
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