By: Amy N. Vegari, Nicolás Q. Galván & Voratida Sangchant (Patterson Belknap Antitrust Update)
Following the announcement of the proposed merger between Microsoft and Activision Blizzard, Inc. (“Activision”) in February 2022, regulatory bodies worldwide have taken varying stances. The EU Commission and the South African Competition Tribunal approved the merger, while the United Kingdom’s Competition and Markets Authority initially opposed the deal. In the United States, the Federal Trade Commission (“FTC”) strongly opposed the merger and sought an injunction to halt it. However, on July 10, 2023, Judge Jacqueline Scott Corley of the Northern District of California denied the FTC’s motion for a preliminary injunction to stop the merger. This development, coming shortly after Judge Corley partially granted and partially denied a motion to dismiss a class action brought by video game players, appears to bring Microsoft and Activision closer to finalizing their proposed deal this fall.
The proposed merger between Microsoft and Activision has drawn significant attention from the global antitrust community, primarily due to its scale: a $68.7 billion merger, marking the largest ever between U.S. technology companies. In 2022 alone, Microsoft reported $198 billion in revenue, while Activision had $7.5 billion.
Microsoft’s gaming division operates in a vertically aligned manner, manufacturing devices like Xbox and personal computers (“PCs”) for video games and creating the games themselves, such as the Halo and Elder Scrolls franchises. On the other hand, Activision develops video games for various platforms, including consoles, PCs, and mobile devices. Some of the world’s most popular games, including Candy Crush, as well as the Warcraft, Diablo, Overwatch, and Call of Duty franchises, were created by Activision.
Of particular concern to regulators is the Call of Duty franchise, known for its immense popularity. For instance, Call of Duty: Modern Warfare II, released in 2022, generated $1 billion in sales within just ten days of its release. For comparison, Disney’s Avengers: Endgame, the fastest-earning film upon its release, reached $1 billion in sales in five days. Titles from the Call of Duty franchise accounted for ten of the top fifteen console games sold from 2010 to 2019, accumulating purported revenues of $27 billion from its launch in 2003 through 2020…