Microsoft Activision Blizzard merger – do you hear the Call of Duty?

The proposed merger between the two tech giants, Microsoft and Activision Blizzard is worth a lot of money: $68.7bn. On 18 July, the reverse termination fee kicks in and, if Microsoft cannot get the deal over the line before then, they are liable for a $3bn payment to Activision. So, there is a lot at stake and the clock is ticking.

On 26 April 2023 the UK CMA announced its decision to refuse the merger, notwithstanding the safeguard measures offered by the parties.

On 15 May 2023 the EU Commission, to the surprise of some, agreed the deal, subject to conditions.

The USFTC sought injunctions restraining the merger from going ahead.

Today (12/07/2023) Judge Jacqueline Scott Corley ruled against the USFTC. At the heart of the Judge’s decision was her decision that the USFTC had failed to convince her that the combined corporation would ‘probably pull Call of Duty’ from Sony Play Station, or that [Microsoft’s] ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets’.

I think, at the heart of this decision, was the fact that:

Microsoft executives have nonetheless committed publicly and under oath in court to continue to sell Call of Duty to Sony. (Dkt. No. 285, 6/28/23 Tr. (Nadella) at 853:9-11 (Q: “Let me ask you here today, Mr. Nadella, will you commit to continuing to ship Call of Duty on the Sony PlayStation?” . . . A: “A hundred percent.”); Dkt. No. 283, 6/23/23 Tr. (Spencer) at 367:18-24, 368:4-10, 429:21-22, 429:25-430:1 (“my commitment is and my testimony is, to use that word, that we will continue to ship Call of — future versions of Call of Duty on Sony’s PlayStation platform”).)

Full judgment at –https://storage.courtlistener.com/recap/gov.uscourts.cand.413969/gov.uscourts.cand.413969.305.0_4.pdf

So, where does this leave this merger and what are the implications for anti-trust in the UK, the US and the EU?

The UK case is now with the CAT. Given the merger clock expires on 18 July and any default on that date will leave Microsoft open to a $3bn bill, the pressure will be on the UK CMA and CAT to reach a decision quickly.

Overnight the CMA stated its door was always open to fresh proposals in terms of safeguards, but the CMA will be aware of the US court findings and the decision of the EU. Safeguarding proposals can be structural and/or behavioural. Given the size of this deal, its complexity and the fact that two of the big three jurisdictions have cleared the merger in one way or another, it is difficult to see how the two tech giants can substantively restructure the deal. This leaves behavioural undertakings to continue access to the relevant games and markets (cloud gaming) for sufficient periods that will allow the CMA to change its decision.

The CMAs decision was right when it made it and it should stick to its position. The relevant market was analysed in detail; the law was applied correctly. The CMA did not feel the safeguarding measures to ensure continued competition were sufficient to allay its competition concerns. The CAT will only allow an appeal on grounds analogous to Judicial Review. It will not ‘re-hear’ a case. The CAT will overturn a decision which is irrational in legal terms, or which is wrong in law. So, the odds are against a successful legal challenge in the CAT.

Where does this leave competition law more generally? The EU has demonstrated no willingness to prevent this merger. The USFTC signalled a more aggressive approach. In November 2022, the USFTC released a policy statement that radically expanded its role under section 5 FTC Act 15 USC para 45. The relevant part of the policy statement is as follows; the new policy was meant to

restore the agency’s policy of rigorously enforcing the federal ban on unfair methods of competition

Well, where is that policy now? The answer is that it is in ruins and the position of the Chair, Lina Khan, must be called into question.

About the authors

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Jonathan Compton


Specialist in commercial disputes, banking and finance, regulatory and anti-trust/competition law.

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