Judge Grants FTC Injunction To Temporarily Block Microsoft-Activision Deal

Microsoft’s troubled $68.7 billion (£55bn) acquisition of Activision Blizzard continues to face regulatory opposition from the UK and US.

On Monday the US Federal Trade Commission (FTC) applied for a temporary restraining order and preliminary injunction ahead of a 18 July deadline agreed by the two firms to close the deal.

If Microsoft fails to complete the deal, which was originally announced in January 2022, it could end up owing Activision Blizzard a termination fee of up to $3bn.

Injunction granted

The FTC told the District Court for the Northern District of California that a preliminary injunction was necessary “because Microsoft and Activision have represented that they may consummate the Proposed Acquisition at any time.”

The FTC had initially asked an administrative judge to block the transaction in December 2022, and the case is due to begin on 2 August.

Now Reuters has reported that US district judge Edward Davila has granted the FTC’s request to temporarily block the deal, and has set a hearing for next week.

On Tuesday, judge Edward Davila scheduled the two-day evidentiary hearing on the FTC’s request for a preliminary injunction for 22 and 23 June in San Francisco.

Without a court order, Reuters reported Microsoft could have closed on the deal as early as Friday.

Based on the late-June hearing, the federal court will decide whether a preliminary injunction – which would last during the administrative review of the case – is necessary.

According to Reuters, judge Davila reportedly said the temporary restraining order issued on Tuesday “is necessary to maintain the status quo while the complaint is pending (and) preserve this court’s ability to order effective relief in the event it determines a preliminary injunction is warranted and preserve the FTC’s ability to obtain an effective permanent remedy in the event that it prevails in its pending administrative proceeding.”

Microsoft and Activision must submit legal arguments opposing a preliminary injunction by 16 June.

The FTC must reply on 20 June.

Microsoft reportedly said Tuesday “accelerating the legal process in the US 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.”

Divided regulators

The regulatory authorities in the United States and United Kingdom are both seeking to stop the deal.

In April the UK’s CMA officially blocked the deal, citing potential harm to the nascent market for cloud gaming.

The UK decision provoked a furious response from Microsoft, which said at the time that the CMA’s decision was a sign that the UK was “clearly closed for business”, and added the CMA’s move “discourages technology innovation and investment” in the UK.

Microsoft appealed against the CMA ruling, and last week Microsoft President Brad Smith met with the UK’s Chancellor Jeremy Hunt in London for talks.

Meanwhile the chief executive of the UK’s CMA appeared before a Parliamentary panel last month to defend the Microsoft-Activision ruling to Parliament, and said the agency was not seeking to foster ‘hostile environment’.

But it should be noted that not all regulators agree with the UK and US on this.

In May Chinese regulators (SAMR) officially approved Microsoft’s the $69 billion (£56bn) takeover of Activision Blizzard.

Meanwhile European Union regulators, which initially expressed concerns, also approved the deal in May, after Microsoft offered ten-year licensing deals to rivals.

However Sony, the main gaming console rival to Microsoft, has not accepted such a deal.

The deal has so far been approved by nearly 40 countries, including 27 in the EU along with others including Japan and Brazil.