The Federal Trade Commission backed down from its in-house legal challenge to stop Xbox maker Microsoft (MSFT) from acquiring gaming developer Activision Blizzard (ATVI), a major win for the tech giant.
The about-face for the FTC cleared another impediment to Microsoft's $69 billion agreement to acquire the “Call of Duty” franchise developer, leaving one final hurdle in the UK. The two companies recently set a new Oct. 18 deadline to close the deal, giving them more time to satisfy regulators.
“The recent decision in the US and approvals in 40 countries all validate that the deal is good for competition, players, and the future of gaming,” a spokesperson for Activision Blizzard said Wednesday in an email to Yahoo Finance.
“We’re confident in our next steps and that our deal will quickly close.”
Activision Blizzard is the largest game publisher in North America. In addition to the hit “Call of Duty” franchise, the company also offers “World of Warcraft,” “Diablo,” and “Overwatch.” The firm also owns mobile game publisher King, the company behind “Candy Crush.”
Adding those franchises to Microsoft’s existing titles, including “Halo” and “Forza,” would catapult Microsoft past Nintendo (NTDOY) to make the company the second-largest home console maker by revenue behind Sony (SONY).
It would also put Microsoft behind Tencent and Sony as the third-largest gaming company by global revenue.
FTC commissioners withdrew the agency's litigation in a document filed Thursday, pausing all proceedings before the agency's administrative law judge. The case was set for trial beginning Aug. 2.
With the administrative case now withdrawn, Microsoft and Activision have no legal barrier in the US to closing their deal. However, the FTC could still ask Microsoft for additional concessions in exchange for an agreement not to sue in federal court.
Microsoft and Activision had pressed the FTC to drop the case in a joint motion filed Tuesday, after the regulator's legal campaign was significantly weakened by a US appellate court.
That appellate court had denied the agency's request to pause the merger, technically clearing the way for the companies to close in the US. The FTC appealed that ruling.
Microsoft has spent roughly 10 months negotiating with domestic and overseas antitrust regulators to calm fears that the tie-up would threaten competition in various gaming markets.
The company was originally set to finalize its purchase of the "Call of Duty" maker on July 18, but the regulatory actions in the UK and US slowed the ability to get the deal done.
Under the terms of a revised agreement, a prior $3 billion breakup fee increases to $3.5 billion if Microsoft fails to close the purchase by Aug. 29, and $4.5 billion if it can't get it done by Sept. 15.
The last hurdle is now in the UK. After initially blocking the merger over concerns that Microsoft would gain too much market dominance in cloud gaming, the UK's Competition and Markets Authority (CMA) agreed to reopen negotiations with the tech giant. A London court then paused Microsoft’s appeal of the regulator’s initial decision.
One recent concession to regulatory concerns was that Microsoft promised to make Activision’s widely popular “Call of Duty” franchise available for 10 years to rival gaming console maker Sony, in addition to earlier agreements with Nvidia and Nintendo.
Those earlier agreements to make the game available to Nintendo and Nvidia weren't enough to persuade UK regulators that Microsoft's concessions were sufficient. The regulator expressed worries that the merger would nonetheless give Microsoft too much dominance in cloud gaming.
The FTC for its part said the acquisition could harm consumers not only in cloud gaming, but also gaming subscription services and gaming consoles.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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