The U.S. Federal Trade Commission (FTC) announced Wednesday it is appealing a federal judge’s ruling that Microsoft ( MSFT.O ) voided its $69 billion purchase of “Call of Duty” maker Activision Blizzard. (ATVI.O).
Microsoft’s court victory on Tuesday and a subsequent reversal by Britain’s competition regulator brought the tech giant two steps closer to ending its relationship with Activision, Microsoft’s biggest deal yet.
However, the deal between Microsoft and Activision is more likely to expire on July 18 due to any upcoming regulatory hurdles. After July 18, both organizations are free to back out of the deal, unless they negotiate an extension.
The appeal filed by the FTC court did not detail the hearing in the West Coast Ninth Circuit Circuit Court of Appeals.
Microsoft said it would challenge the appeal.
“We are disappointed that the FTC is pursuing an apparently weak case, and we will resist any attempt to delay its ability to move forward,” Microsoft President Brad Smith said in an emailed statement.
The FTC declined to comment further on the appeal.
While the companies were able to deny an injunction against completing the deal on Tuesday, the judge gave them a hold until Friday to give the FTC time to appeal.
The FTC can apply to an appeals court to stay the deal from completion.
In her opinion, US District Judge Jacqueline Scott Corley in San Francisco dismissed the Biden administration’s argument that the deal would harm consumers by giving Xbox game maker Microsoft exclusive access to games including the best-selling Call of Duty.
Britain’s competition and markets regulator, which opposed the deal, said on Wednesday that a restructured deal between Microsoft and Activision Blizzard could ease its concerns, pending a new investigation.
“Maybe” or “Will”?
US legal experts disagree on whether the FTC has a valid basis for appeal. Some said the appeals court withheld facts from the judges, and others suggested that Judge Corley may have incorrectly defined the standard for concluding a contract.
In his 53-page filing, Corley said it’s not enough for the FTC to argue, “a merger would lessen competition — the FTC must demonstrate that the merger would substantially lessen competition.”
Legal scholars have questioned that standard, saying that while US antitrust law requires the FTC to show that a proposed agreement is “likely to harm” competition, it does not.
To address the FTC’s concerns, Microsoft has agreed to license Call of Duty to competitors, including a 10-year deal with Japanese company Nintendo Co ( 7974.T ), pending completion of the merger.
When US antitrust authorities lose merger cases in court, appeals are rare.
However, the FTC appealed a ruling more than a decade ago when it lost a fight against Whole Foods’ purchase of wild oats. The agency settled with the companies before the appeals court issued its decision.
Reporting by Diane Bartz. Adaptation by Diane Craft, Lincoln Feast and Muralikumar Anantharaman
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