FTC is appealing ruling that cleared Microsoft to buy Activision Blizzard

The Federal Trade Commission (FTC) says it is appealing a recent US federal court order that cleared the way for Microsoft to purchase Activision Blizzard. The FTC has filed a notice that it’s appealing Judge Jacqueline Scott Corley’s decision, but we won’t know the regulator’s arguments until the full appeal is submitted to the Ninth Circuit Court of Appeals.

Microsoft won a grueling fight with the FTC earlier this week, with a federal judge denying a preliminary injunction request from the US regulator. “The Court finds the FTC has not shown a likelihood it will prevail on its claim this particular vertical merger in this specific industry may substantially lessen competition,” Judge Corley wrote in the ruling. “To the contrary, the record evidence points to more consumer access to Call of Duty and other Activision content.”

If the preliminary injunction had been granted, it would have temporarily blocked Microsoft from closing its Activision Blizzard deal until the result of the FTC’s own administrative case against the company. That separate legal challenge is still due to commence on August 2nd.

Now that the FTC is choosing to appeal Judge Corley’s decision, the regulator needs the Ninth Circuit Court of Appeals to issue an emergency stay to extend the existing temporary restraining order (TRO) that is set to expire at 11:59PM PT on Friday, July 14th. It’s not clear if the appeals court will even rule before the deal deadline on July 18th, potentially leaving the door open for Microsoft to close the Activision Blizzard deal on Monday or Tuesday without a restraining order in place.

Microsoft still needs to resolve the issues of the UK’s Competition and Markets Authority (CMA) with its acquisition before it can close, after the regulator blocked the deal on cloud concerns earlier this year. Both Microsoft and the CMA almost instantly announced they had agreed to pause their legal battles to negotiate after Judge Corley’s ruling on Tuesday.

In a surprise statement on Wednesday, the CMA then warned Microsoft’s opportunity to restructure its deal could “lead to a new merger investigation,” and that talks between the regulator and Microsoft were still at an “early stage.”

A report from CNBC originally claimed Microsoft and the CMA had agreed on a “small divestiture” to address the cloud gaming concerns, but was later corrected to clarify Microsoft has only offered “a small and discrete divestiture” that the CMA hasn’t necessarily accepted. CNBC didn’t expand on what that divestiture could involve, but such a scenario will likely be specific to the UK and could involve changes to Microsoft’s Xbox Cloud Gaming services in the region.

Microsoft’s deal with the EU included a key remedy that involves a free license to consumers in EU countries that would allow them to stream via “any cloud game streaming services of their choice” all current and future Activision Blizzard PC and console games that they have a license for. Cloud providers will also be offered a free license to stream these games.

All eyes now turn to the Ninth Circuit Court of Appeals and Microsoft’s potential deal with the CMA in the UK.

Correction July 12th, 7:33PM ET: Based on a CNBC report, this article originally stated Microsoft and the CMA may have agreed to a “small divestiture.” CNBC has corrected its article, and now says that Microsoft offered the divestiture without saying the change has been accepted.