The FTC Is Trying To Get Back Into The Ring With Microsoft Over Activision Deal

Uh, well, okay then. I really thought we were done with the whole Microsoft buying Activision Blizzard saga. Hell, I even wrote what I thought was a final post on the matter, called the post a curtain call, and discussed how the deal had passed all the regulatory barriers and had been consumated. That happened after the FTC lost in court on its request for a TRO to block the deal and then subsequently paused on its suit entirely, clearing the way for the deal to move forward. At the time, the FTC made some noises about appealing the lower court’s decision, but then didn’t.

Until now. Nearly five months later, the FTC has appealed the court’s decision, arguing that the lower court essentially just believed whatever Microsoft said at face value.

The US government told a federal appeals court Wednesday that Microsoft’s recent purchase of Activision should not have been cleared by a lower-court judge, because the judge had been too deferential to Microsoft’s promises about the future of “Call of Duty,” a popular first-person shooter game.

District Judge Jacqueline Scott Corley went too far, the Federal Trade Commission argued, when she ruled in July that 11th-hour contracts Microsoft signed with Nintendo, Nvidia and other gaming companies concerning “Call of Duty” would resolve anticompetitive concerns related to the blockbuster deal.

Even if you think that the FTC’s argument is valid, which I very much do and wrote about at the time, I will be completely surprised if this gets any traction. Too much has progressed in too many places, especially in the European markets, to imagine the courts somehow coming back 2 months after this deal was completed and unringing the bell.

The only shred of hope I could see this having is the part of the FTC’s argument in which it claims that Microsoft’s decision to go around inking a bunch of 10 year deals to bring certain titles, namely the Call of Duty series, to non-Microsoft platforms altered the landscape the FTC was analyzing so significantly that it didn’t have the time dig into the details and build an argument against that new landscape.

“I fail to understand how giving somebody a monopoly of something would be pro-competitive,” said Imad Dean Abyad, an FTC attorney, in the argument Wednesday before the appeals court. “It may be a benefit to some class of consumers, but that is very different than saying it is pro-competitive.”

Abyad said that Microsoft’s flurry of licensing agreements in response to regulator scrutiny altered the economic picture in ways the FTC did not have an opportunity to fully review but that courts are now forcing it to accept.

“What the district court relied on, mostly, are contracts that were entered into after the [FTC] complaint was filed,” Abyad said. “The facts were changing all along. Even after the district court decided the case, Microsoft went ahead and entered into yet another contract [to restructure the cloud licensing rights].”

We said at the time that Microsoft was clearly taking the complaints from various regulatory bodies as some sort of paint by numbers prescription as to what deals to make to get around them. And I very much can see the FTC’s point on this. It brought a complaint under one set of facts only to have Microsoft alter those facts, leading to the courts slamming the deal through before the FTC had a chance to amend its arguments.

But ultimately it won’t matter. This last gasp attempt will almost certainly fail. American regulatory bodies have dull teeth to begin with and I’ve seen nothing that would lead me to believe that the courts are going to allow the agency to unwind a closed deal after everything it took to get here.