Microsoft’s Activision Blizzard merger can’t be blocked by FTC, judge rules

Microsoft and Activision Blizzard earned a big win in court today, as a federal judge ruled that the Federal Trade Commission cannot block the $68.7 billion merger.

The FTC sued Microsoft in December in an attempt to stop its acquisition of the gaming giant, which owns massive franchises like World of Warcraft and Call of Duty; the government body worried that the deal would “enable Microsoft to suppress competitors.” Microsoft already has a significant presence in the gaming industry, producing products like the Xbox console, the Game Pass subscription and Xbox Cloud Gaming, and it owns dozens of existing game studios like ZeniMax.

However, Judge Jacqueline Scott Corley ruled that Microsoft’s acquisition of Activision Blizzard would not be anti-competitive.

“The FTC has not shown it is likely to succeed on its assertion 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,” the judge wrote.

This ruling is a great sign for Microsoft. Though the deal is still not set in stone, Microsoft got even more good news today that could continue to propel the acquisition forward. Despite facing legal challenges in the U.K., where the Competition and Markets Authority (CMA) tried to block the deal, the ruling against the FTC seems to have changed things. According to Microsoft president Brad Smith, the company has agreed with the CMA to pause this litigation.

“While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA,” Smith wrote in a statement.

The CMA’s appeal is mostly focused on cloud gaming, arguing that Windows’ “significant cloud infrastructure” would give Microsoft an unfair advantage upon acquiring Activision Blizzard titles. Microsoft has attempted to assuage these fears, pointing out that the company had signed deals guaranteeing that Activision Blizzard games would remain available on consoles other than Xbox.

On Activision Blizzard’s end, these legal developments are welcome breath of fresh air.

For the last several years, Activision Blizzard has been a company defined by turmoil. CEO Bobby Kotick had been rumored to step down amid ongoing government investigations and sexual harassment scandals. One lawsuit filed by California’s Department of Fair Employment and Housing described the work environment at the gaming company as having a “frat boy culture.” And per a Wall Street Journal report, Kotick knew for years about sexual misconduct and rape allegations at his company, but he did not act.

Some Activision Blizzard employees have responded by organizing union drives, and despite corporate interference, the workers formed some of the first ever unions at major U.S. gaming companies. On that front, labor organizers are cheering on Microsoft’s court victory today.

Last year, Microsoft and the Communications Workers of America (CWA) announced an unprecedented labor neutrality agreement. This means that Microsoft will remain neutral and offer a fair process for voluntary recognition of employee unions.

“By accepting Judge Corley’s decision and allowing this merger to move forward, the Federal Trade Commission has an opportunity to transform the video game and technology labor market by providing a clear path to collective bargaining for almost 10,000 workers,” the CWA wrote in a statement.

The National Labor Relations Board has found in multiple instances that Activision Blizzard illegally interfered with employee organizing; but if the gaming giant were owned by Microsoft, its leadership would have to abide by that labor agreement, meaning that the process of organizing a union at Activision Blizzard would be more accessible.