If a federal judge grants the FTC's request, Microsoft may abandon its Activision merger.
Microsoft and Activision's proposed $68.7 billion merger faces an uncertain future. Both companies have stated that if federal judge grants Federal Trade Commission's (FTC) request for preliminary injunction, they may abandon the merger. The fate of the Microsoft-Activision merger is now in hands of Northern California federal courts, with significant ramifications for the gaming industry.
The US antitrust commission, the FTC, has decided to challenge the merger in its internal administrative courts rather than in federal court. They can gain more control over the approval process this way. In this case, the FTC can effectively thwart the merger by taking advantage of a lengthy administrative procedure where the final decision rests with the Commissioners rather than the Administrative Law Judge overseeing the case.
To further complicate matters, the FTC purposely scheduled an eight-month administrative case instead of a shorter five-month proceeding. Consequently, the first hearing is set for August 2, which falls beyond the merger's expiration date of July 18. The intention behind this strategy is to ensure that the FTC can rule against the merger and effectively terminate it.
Recognizing the FTC's opposition to the merger, Microsoft and Activision had planned to proceed with the merger after June 15. Anticipating this move, the FTC sought an emergency temporary restraining order (TRO) to prevent the two companies from merging within a specific timeframe. In an effort to maintain the status quo and address the FTC's more substantial request for a preliminary injunction, Judge Jacqueline Scott Corley has granted the TRO.
The preliminary injunction sought by the FTC is the linchpin in their case. If granted, it would prohibit Microsoft from merging with Activision throughout the duration of the administrative lawsuit. Microsoft's legal counsel believes that this preliminary injunction would spell doom for the merger. They highlight a timeline that could potentially keep the merger in limbo until at least December 2023, and that's only if the administrative proceedings conclude promptly.
However, the FTC has recently passed a new law granting the Commissioners the power to disregard the Administrative Law Judge's decision and put the merger approval to a vote. This additional step could potentially add another year to the process between the ALJ's recommendation and the FTC's final vote.
This uncertainty means that the merger could remain in limbo until at least December 2024. Both Microsoft and Activision would be faced with the challenge of renegotiations and spending millions of dollars on attorney fees and filings. Meanwhile, the video game industry would continue to evolve and expand, requiring the companies to adapt independently.
The Importance of the Preliminary Injunction Decision
Understanding the critical nature of the preliminary injunction decision, Microsoft's legal team has requested ample time to prepare a robust case. They have been granted their request by Judge Corley, who has scheduled five days of evidentiary hearings. These hearings are set to take place on June 22nd, June 23rd, June 27th, June 28th, and June 29th.
It is worth noting that the FTC doesn't need to prove its entire case during these hearings. Instead, Judge Corley will focus on making three specific determinations that will significantly impact the future of the merger.
MLex reporter Michael Acton provides a clear explanation of how this process works:
#Microsoft #Activision - refresher thread for those who may not be familiar with the legal jargon here.To win a preliminary injunction blocking a deal, FTC does *not* have to show it's anticompetitive.— Michael Acton (@MActon93) June 15, 2023
The Microsoft-Activision merger faces a major hurdle as the FTC seeks a preliminary injunction through internal administrative courts. The fate of the merger now rests with Judge Corley, who will determine the course of action based on the hearings held in June. The outcome will not only shape the future of these two tech giants but will also have broader implications for the gaming industry. As the legal battle unfolds, industry insiders and gaming enthusiasts alike will be closely watching for any updates on this high-stakes merger.