Microsoft and Activision Blizzard Push FTC to Abandon Legal Challenge Ahead of August Hearing

July 21, 2023 Update: The Federal Trade Commission has withdrawn its internal administrative challenge to Microsoft's acquisition of Activision Blizzard. According to The Verge, the Commission announced the suspension of its in-house challenge, which was initially set to be heard on August 2. Originally reported on July 20, 2023: Microsoft and Activision Blizzard have submitted a request to the Federal Trade Commission, urging the regulatory body to drop its plans for an administrative hearing scheduled for next month. The hearing was initially set after the FTC issued a legal challenge to Microsoft's proposed acquisition of Activision Blizzard in December. Although the FTC lacks the authority to block the merger, the hearing could potentially lead to the case being escalated to other US courts. However, Microsoft and Activision Blizzard argue that US courts have already demonstrated they do not consider the acquisition anti-competitive, citing the FTC's failure to secure a preliminary injunction from the District Court and the Ninth Circuit's denial of its appeal. In their filing, the companies' legal representatives stated, 'After a five-day evidentiary hearing, the district court found that the FTC is unlikely to succeed on any of the theories of competitive harm advanced in its Complaint for multiple, independently sufficient reasons.' The filing further argues that withdrawing from adjudication is 'not only mandatory but in the public interest.' It also claims that the district court had ample opportunity to consider the FTC's arguments, given the testimonies from major witnesses, including CEOs of Microsoft, Activision, Xbox, and PlayStation, as well as economic experts and other third parties. The FTC submitted 851 exhibits to the district court, along with pre- and post-hearing written submissions. The companies assert that the district court's findings and the thorough examination of the case mean there is little reason to believe the administrative law judge would reach a different conclusion. Additionally, Microsoft's ten-year deal with Sony to keep Call of Duty on PlayStation platforms after the acquisition further undermines the FTC's justification for continuing the case. This filing follows a letter from 22 Republican members of US Congress, also urging the FTC to drop the case. While the FTC may choose to proceed with or abandon the August administrative hearing, it can still contest the merger after the deal is complete by seeking divestiture. However, this option will only be available to the FTC once all appeals have been resolved, a process that could take several years. Microsoft and Activision Blizzard have extended the acquisition deadline to October 18, 2023. With EU approval secured and no remaining barriers in the US, the only regulatory hurdle left to resolve is the UK's block on the deal. Microsoft is working on proposals for a modified version of the deal to address the Competition and Markets Authority's concerns, with the CMA aiming to make a final decision by August 29.