Skip to main content

Microsoft beat the FTC. Here’s what the controversial court ruling means for Xbox

Xbox's logo used during the Extended Games Showcase
Microsoft / .

You’ve probably heard that the Federal Trade Commission (FTC) lost its case against Microsoft after an exciting and revelatory trial. On Tuesday, Judge Jacqueline Scott Corley denied FTC’s motion for a preliminary injunction to block Microsoft’s acquisition of Activision Blizzard before its potential completion by July 18. Ultimately, Corley did not believe that Microsoft owning Call of Duty would “substantially lessen competition” in the game industry. It was major win for Microsoft after months of regulatory hoops and roadblocks, but the FTC quickly moved to appeal the decision. This all raises an important question: What’s next?

Over the next week, Microsoft, Activision Blizzard, and the FTC will determine the fate of the gaming companies involved in this acquisition and set a precedent for the future of the game industry. On top of that, Microsoft still has to deal with the next moves made by the U.K.’s Competition and Markets Authority (CMA), which wants to block the acquisition due to its impact on cloud gaming. Following the release of Judge Corley’s Preliminary Injunction Opinion, I spoke to two analysts and a lawyer with knowledge of the video game industry to better understand what lies ahead for Microsoft and Activision, the FTC, and the CMA. The battle isn’t quite over yet, even if the end is finally on the horizon.

What’s next for Microsoft and Activision Blizzard

Currently, Microsoft and Activision are in a solid position, as a Judge has ruled that Microsoft is unlikely to pull Call of Duty from PlayStation or lessen competition in the game console, cloud gaming, or game subscription markets by acquiring Activision Blizzard. There’s a temporary restraining order in place until July 14, which the FTC hopes to successfully appeal during. As soon as that order is up, though, Microsoft and Activision Blizzard have until July 18 to complete the acquisition.

Xbox acquired Activision Blizzard on January 18, 2022, and gained the rights to Call of Duty, Candy Crush, and more.
Microsoft

MIDiA Research Senior Games Analyst Karol Severin tells Digital Trends that this decision is “an important win that brings the acquisition significantly closer to completion” and that MIDiA sees no clear reason why U.S. courts would stop the deal before then. “It’s an expected continuation of a journey that is to reach its destination soon,” Severin continued. This was a sentiment shared by Sam Castree of Sam Castree Law. The lawyer tells Digital Trends that it’s “extremely likely that the merger goes through” and that he was “remarkably unimpressed with the FTC’s arguments.”

So yes, Severin and Castree believe Judge Corley’s decision makes the acquisition much more possible than it seemed before. And all indications from official comments by Microsoft President Brad Smith and Head of Xbox Phil Spencer made it clear that Microsoft and Activision will try to close their deal by July 18. Severin believes a successful acquisition will be positive for gamers and serve as a catalyst for discussion about the role of a traditional games publisher in the game industry and how much the game industry is consolidating.

“Microsoft’s next move will depend in part on what the FTC decides to do.”

Microsoft wants the deal to go through, and if it were solely up to it, the acquisition would happen by July 18. In reality, Castree believes that Microsoft’s next play will be in direct response to the FTC’s action, like the move to appeal the decision. “Maybe the FTC still takes the case to trial next month and probably loses,” he says. “But at this point, Microsoft is going to just proceed forward with finishing the deal like they had always planned to.”

What’s next for the FTC

The FTC came out as a clear loser from these hearings. Judge Corley denied their attempt at a preliminary injunction and pointed out flaws in the evidence the FTC tried to use to stop the deal. In its final findings of fact documents, the FTC greatly disagrees and are adamant about using appellate courts to prevent this acquisition from going through before July 18. Castree thinks that it’d be best for the FTC to drop the case at this point because of how bad it looks for them and how its attention should be elsewhere. Still, Castree explained why this appeal was something the FTC pursued.

“I think that the FTC’s most viable option — not great, but better than its other options –would be to appeal the denial of the injunction,” Castree tells Digital Trends. “Judge Corley was clear, ‘The Ninth Circuit Court of Appeals [i.e., the appellate court that oversees her district] has not addressed whether this burden-shifting framework applies in vertical merger cases.’ She didn’t have a clear directive from her own appellate court, so she looked to a similar opinion from the appellate court in Washington, D.C. However, the D.C. Circuit’s ruling is not binding in California. So, it’s possible that the 9th Circuit could take a different approach and ultimately decide that, no, actually, the burden that Judge Corley placed on the FTC was too heavy.”

Call of Duty Warzone screenshot of 3 characters walking towards the camera.
Activision

We now know that the FTC is filing an appeal on Judge Corley’s ruling. If successful, Castree explains that this appeal could force Corley to “try again under a different legal test” and “could cause enough of a delay to mess things up for Microsoft.” This could trigger a possible worst-case scenario for Microsoft. However, analysts like Severin don’t think the FTC has much ground to stand on and that the most likely outcome is that the acquisition attempt is eventually successful.

It doesn’t seem like the FTC is ready to give up and stop fighting just yet. We don’t quite know if the necessary sequence of events to prevent the acquisition from happening by July 18 will happen though. We’ll have to wait and see how the appeal plays out in the United States court system. Microsoft isn’t completely free of regulatory scrutiny, though, even if it comes out on top against the FTC. It still has the CMA to deal with.

What’s next for the CMA

In April, the CMA voiced its intent to block Microsoft’s Activision Blizzard acquisition because of the impact it could have on cloud gaming. Following Judge Corley’s decision, the CMA and Microsoft temporarily paused that litigation in the U.K. as they are “considering how the transaction might be modified in order to address those concerns in a way that’s acceptable to the CMA,” according to Brad Smith. That said, the CMA then told The Verge on Wednesday that it could potentially begin a new merger investigation if Microsoft and Activision try to restructure their deal in the U.K.

Although Castree admits that he’s not an expert in the U.K.’s anti-monopoly laws and that the CMA’s cloud gaming issues are different from the FTC’s Call of Duty focus, Castree points out the added pressure the CMA now faces as an outlier internationally. “It’s quite possible that the CMA will not want to look unreasonable as the odd man out, and that’s probably going to be in the backs of everyone’s minds as they are poised to enter into negotiations with Microsoft,” Castree tells Digital Trends.

Key art showing multiple devices playing games via the cloud.
Microsoft

The U.K.-based analysts Digital Trends spoke to don’t think the CMA is as much of a threat to Microsoft now. “In the worst case, the acquisition can close without the U.K. market,” Severin admits. “In a more likely case, there will be some sort of renegotiation with CMA in the coming days, and/or Microsoft’s appeal hearing will take its course.”

Omdia Senior Principal Analyst George Jijiashvili mostly agrees, although he thinks it’s unlikely Microsoft will pull out of the market altogether. “Microsoft would probably also want to avoid having to offer a differentiated service in the U.K. due to the complexities involved,” Jijiashvili told Digital Trends. “I, therefore, think working out a deal with CMA is the most desirable outcome for Microsoft.”

What’s next?

In April, it looked like the Activision Blizzard acquisition might not happen after the CMA’s decision. Now, it seems more likely the CMA and Microsoft will want to reassess things together and come to a more amicable deal as the acquisition completes in the U.S.

Speaking to analysts and a lawyer about the outcome of these hearings, it seems likely that the deal could go through, although the FTC and CMA will continue to have objections to aspects of the acquisition. It’s possible for the purchase to not happen if some shocking new Microsoft-damning evidence emerges or the U.S. Appellate Courts reverse Judge Corley’s decision. Still, those are hypotheticals at this time.

So, what’s next? Microsoft is going to hope the FTC’s appeal is not successful — or timely enough to happen pre-merger — and will do all it can to get this Activision Blizzard acquisition done in North America before that July 18 date. The FTC and CMA are still presenting roadblocks that could negatively impact the deal, what happens over this next week will shape one of the most important moments in the history of Xbox.

Tomas Franzese
Tomas Franzese is a Staff Writer at Digital Trends, where he reports on and reviews the latest releases and exciting…
Microsoft finally closes its $69B Activision Blizzard acquisition
Xbox acquired Activision Blizzard on January 18, 2022, and gained the rights to Call of Duty, Candy Crush, and more.

It's done: Microsoft completed its acquisition of Activision Blizzard. The $69 billion deal means that some of gaming's biggest franchises, including Call of Duty, are now Xbox properties.

First announced in January 2022, the blockbuster deal has faced tons of scrutiny from regulators like the CMA and FTC, with there being worry that it'd be unfair to competition in various parts of the game industry. Ultimately, Microsoft proved that wasn't the case, defeating the FTC in court and finally getting the CMA to retract its objection to the deal earlier today. When the CMA did that, an Activision Blizzard spokesperson told Digital Trends "The CMA’s official approval is great news for our future with Microsoft, and we look forward to becoming part of the Xbox Team.”

Read more
Microsoft wins FTC case, removing Xbox’s biggest Activision Blizzard acquisition hurdle
Characters shooting in Call of Duty: Modern Warfare 2.

Following a multi-week court case, Microsoft has won its battle with the Federal Trade Commission regarding its proposed Activision Blizzard acquisition. The ruling is a major win for Microsoft's troubled deal, clearing the biggest hurdle it faced.

Last January, Microsoft announced its intention to acquire Activision Blizzard for $69 billion. The blockbuster announcement immediately raised antitrust concerns, which resulted in the FTC filing a legal challenge in December 2022. Microsoft has not been able to proceed with the acquisition since then, as its faced similar scrutiny in the U.K.

Read more
FTC v. Microsoft: 5 surprising revelations from the court hearing that you need to know
Call of Duty Warzone screenshot of 3 characters walking towards the camera.

We have reached an inflection point in Microsoft’s efforts to acquire Call of Duty and World of Warcraft publisher Activision Blizzard as the FTC’s lawsuit to stop it went before a judge. Representatives from Microsoft, Sony, Nintendo, Google, and Nvidia chimed in during the hearing, as did a variety of analysts presenting data to help determine whether or not this acquisition will hurt competition in the console and cloud gaming markets.
As the video game industry is quite buttoned-up and secretive, this trial has given us an unprecedented look behind the curtain at Xbox, PlayStation, and Activision’s motivations, past claims and mistakes they made, and more. In a case filled with revelations, these five details were a particularly illuminating look into the video game industry's inner workings.
Microsoft revealed its real cloud gaming motivation

Since 2019, Microsoft has been one of the video game industry’s biggest purveyors of cloud gaming alongside the likes of Nvidia, Amazon, and Google. It previously claimed that its primary goal with this was to get its hardcore games like Halo in front of as many people as possible, but this trial has revealed a secondary motivation. Microsoft hoped cloud gaming would give them an edge in the mobile gaming market, where Xbox has struggled to establish itself.
“We built xCloud knowing that on Xbox we have many games that run on our console,” Head of Xbox Phil Spencer explained. “There are many users around the world that have phones that aren’t able to play those games, nor will they be. Our strategy was to put consoles in our data centers to stream those consoles to a mobile phone, so if someone wanted to play Halo on a mobile phone, they would have access to those games through streaming.
It didn’t work out that way, though. Xbox’s VP of Game Creator Experience, Sarah Bond, testified that the most common use for cloud gaming is not mobile play but console players trying out a game before or during a download. Because cloud gaming is a sticking point for the CMA, Microsoft wants to downplay its relevancy to Xbox’s business, but, as I wrote in April, it might be too late for them to do that. Even if cloud gaming’s future is as a supplementary service on consoles, it’s sticking around as one of the central aspects of dissent against the acquisition. The future of cloud gaming is just playing out in a way no one predicted when it re-rose to prominence four years ago.
Activision regrets not putting Call of Duty on Nintendo Switch

Read more