Microsoft wins appeal in FTC challenge to $69 billion Activision Blizzard deal

By Mike Scarcella

(Reuters) -A federal appeals court on Wednesday rejected a legal challenge by the Federal Trade Commission to Microsoft's $69 billion purchase of “Call of Duty” maker Activision Blizzard.

The San Francisco-based 9th U.S. Circuit Court of Appeals upheld a lower judge's order that said the FTC was not entitled to a preliminary injunction blocking the deal, which closed in 2023.

A three-judge panel unanimously ruled that the lower judge had applied the correct legal standards and said the FTC had not shown it was likely to succeed on its claims that the merger would restrict competition.

A spokesperson for the FTC declined to comment. Microsoft did not immediately respond to a request for comment.

The decision came in an antitrust lawsuit filed by the Federal Trade Commission in 2022 against Xbox maker Microsoft.

The FTC, which enforces antitrust law, separately challenged the merger in an internal administrative action. That proceeding was placed on hold in 2023 during President Joe Biden's administration, pending the 9th Circuit's decision.

The Activision Blizzard transaction marked the largest-ever acquisition in the video gaming market. The deal closed in late 2023 after competition authorities in the UK approved it. The purchase also faced regulatory scrutiny in other international markets.

The FTC's lawsuit sought an order freezing the Activision transaction while the agency pursued its administrative challenge.

The agency claimed the Microsoft-Activision tie-up would allow the merged company to fend off competitors to the Xbox console and to its subscription and cloud-based gaming business.

U.S. District Judge Jacqueline Scott Corley had refused to block the acquisition in July 2023, finding that the FTC had not shown Microsoft's ownership of Activision would "substantially lessen competition in the video game library subscription and cloud gaming markets."

The FTC argued in its appeal that the court applied an overly stringent standard in weighing whether to grant a preliminary injunction.

(Reporting by Mike Scarcella; additional reporting by Jody Godoy in New York; Editing by Leslie Adler)