FTC drops case over Microsoft’s $69bn Activision Blizzard acquisition

The FTC has dropped its case seeking to block Microsoft's $69 billion acquisition of Activision Blizzard, citing that further pursuit is not in the public interest; this decision follows a previous court loss for the FTC and aligns with the new FTC chair's focus on cases fitting a different agenda. Microsoft's president hailed the decision as a victory, while the FTC is also reportedly shutting down other cases initiated by the previous chair, including one against PepsiCo, signaling a shift in the agency's priorities and enforcement strategies.

Analysis

The U.S. Federal Trade Commission (FTC) has officially withdrawn its challenge to Microsoft's $69 billion acquisition of Activision Blizzard, a deal that closed in 2023 and marked the largest-ever transaction in the video gaming sector. The FTC stated that pursuing the case against the already-completed merger was no longer in the public interest. This decision follows the FTC's loss on May 7th in an appeal seeking to reverse a judge's ruling that declined to block the deal. The move also signals a shift in the agency's priorities under new FTC Chair Andrew Ferguson, who is reportedly redirecting resources towards cases aligned with a different agenda, such as an investigation into alleged collusion by advertisers on X, and is discontinuing certain efforts initiated by his predecessor, Lina Khan, including a price discrimination case against PepsiCo. Microsoft President Brad Smith characterized the FTC's withdrawal as a "victory for players across the country and for common sense in Washington DC," effectively removing the final, albeit diminishing, legal threat that could have sought to unwind the acquisition at a trial previously scheduled for July. The FTC's original concerns centered on the potential for Microsoft to leverage Activision's assets, like Call of Duty, to disadvantage competitors to its Xbox console and its growing subscription and cloud-based gaming services.

Key Decisions for Investors

• For Microsoft (MSFT) investors, the FTC's decision to drop the case removes the final legal overhang concerning the $69bn Activision Blizzard acquisition, further solidifying the integration and expected contributions to its gaming division, particularly in console, subscription, and cloud gaming services.
• The shift in FTC leadership and strategy, evidenced by the dropping of this case and the PepsiCo (PEP) matter, may suggest a potentially more favorable regulatory environment for large-scale M&A; investors should monitor future FTC enforcement actions to assess the persistence of this trend.
• Given that Activision Blizzard is now fully part of Microsoft, this news provides ultimate certainty regarding the transaction's finality, which is a positive for the stability and outlook of Microsoft's expanded gaming portfolio.