Microsoft's Proposed Activision Blizzard Acquisition Receives Preliminary Approval

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Microsoft's proposed purchase of Activision Blizzard for $69 billion took a significant step forward on Tuesday as a U.S. judge endorsed the deal, while a British regulator hinted at potentially reconsidering its previous objections. Following this news, Activision's stock jumped by 10%.

Both the U.S. and UK have been scrutinizing this mega deal, which marks Microsoft's largest-ever transaction and a historic event in the video game industry. Microsoft's stock also experienced a modest uptick, gaining 64 cents to reach $332.47.

U.S. District Judge Jacqueline Scott Corley, located in San Francisco, refuted the Biden administration's claim that this merger would negatively impact consumers, offering Microsoft, the manufacturer of the Xbox gaming console, exclusive rights to popular games like "Call of Duty".

Shortly following Corley's decision, the UK's Competition and Markets Authority (CMA) indicated a willingness to review Microsoft's plans to mitigate anti-trust concerns, suggesting a potential compromise between the two parties.

Joost Van Dreunen, a professor at New York University's Stern School of Business, pointed out, "The various testimonies that emerged during the U.S. trial undermine the UK’s antitrust watchdog’s objections.”

The U.S. Federal Trade Commission (FTC) has voiced concerns that Microsoft could leverage Activision's games to disadvantage console competitors, including Nintendo and the current market leader, Sony Group.

Judge Corley, however, did not concur with these concerns, stating that the FTC has not convincingly demonstrated that the combined entity would likely remove "Call of Duty" from Sony PlayStation, or that its ownership of Activision's content would significantly harm competition in the video game library subscription and cloud gaming sectors.

The FTC has been given until the end of the week to contest the judge's ruling.

Douglas Farrar, spokesperson for the FTC, expressed the agency's disappointment, stating that the merger presents a significant risk to open competition in cloud gaming, subscription services, and consoles. He affirmed that the FTC will announce its next steps to safeguard competition and consumer interests in the coming days.

PwC estimates that gaming market sales will surge by 36% over the next four years, reaching $321 billion. Judge Corley's decision thus represents a challenge to the broader efforts of the Biden administration to decrease consumer costs.

Microsoft President Brad Smith expressed gratitude for the "quick and thorough" decision and stated his attention will now shift to exploring modifications to the deal to appease the CMA's reservations.

Analyst Franco Granda from D.A. Davidson & Co speculated that Microsoft and the CMA might reach an agreement within the next few weeks.

The trial also discussed other top-selling games produced by Activision, such as "World of Warcraft," "Diablo," and the mobile game "Candy Crush Saga."

In response to FTC's concerns, Microsoft proposed licensing "Call of Duty" to its competitors, including a 10-year contract with Nintendo, subject to the merger's completion.

During the June trial, Microsoft CEO Satya Nadella defended the deal, arguing that the company would not have any incentive to exclude Sony's PlayStation or other competitors to boost sales of Microsoft Xbox consoles.

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