FTC secures restraining order temporarily prohibiting Microsoft-Activision merger from closing

California courts have granted the Federal Trade Commission's request for a restraining order to temporarily prohibit the MSFT-ATVI merger from closing.

2 minutes & 59 seconds read time

Federal judge Jaqueline Scott Corley has granted the FTC's request for a temporary restraining order in the Microsoft-Activision merger case, but the most important order has yet to be issued.

FTC secures restraining order temporarily prohibiting Microsoft-Activision merger from closing 322

In a bid to stall (and ultimately prevent) the Microsoft-Activision merger from closing, the Federal Trade Commission sought two court orders from federal courts: a temporary restraining order (TRO), which would prohibit Microsoft and Activision from merging for a specified period of time, and the more important preliminary injunction (PI), an order that would restrict the merger from closing until after the FTC's internal administrative lawsuit is complete. The tech firms have indicated they would "close-over," or merge together despite the ongoing FTC admin lawsuit, at any time after June 15. This pressured the FTC to file for emergency intervention from federal courts.

Northern California District Judge Jaqueline Corley has approved the FTC's request for a TRO. This order temporarily restrains Microsoft and Activision from merging. The two billion-dollar games companies cannot join together until five days after the court decides whether or not to issue the preliminary injunction order. The PI order remains the FTC's main goal with seeking federal intervention.

The FTC believes the combination of Microsoft and Activision would lead to anti-competitive harm in the gaming sector, and has opted to challenge the merger in its internal administrative courts. Now that the FTC has sought--and found--intervention from federal courts, the merger has become a federal case at least in the context of these requested orders.

The court order explains the situation:

The FTC seeks a temporary restraining order (TRO) and preliminary injunction enjoining Defendants Microsoft and Activision from consummating a proposed transaction while the FTC's administrative review of the transaction is pending.

The Court, having read and considered the TRO, finds that temporary relief pursuant to Federal Trade Commission Act § 13(b), 15 U.S.C. § 53(b), is necessary to maintain the status quo while the Complaint is pending, preserve this Court's ability to order effective relief in the event it determines a preliminary injunction is warranted, and preserve the FTC's ability to obtain an effective permanent remedy in the event that it prevails in its pending administrative proceeding.

The FTC still has to prove that a preliminary injunction is necessary. The specific preliminary injunction would allow the FTC to effectively stall Microsoft and Activision from merging until its administrative lawsuit is completed.

An evidentiary hearing for the FTC's admin lawsuit is schedule for August 2023. This hearing is past the merger's termination date of July 18, 2023. If a preliminary injunction is issued, Microsoft and Activision will have to re-negotiate a deal or abandon the merger, in which case Microsoft would pay Activision a $3 billion termination fee.

If the FTC is denied the preliminary injunction, then Microsoft and Activision will likely "close over" and merge even during the ongoing FTC admin lawsuit.

The federal court has scheduled a first-step evidentiary hearing for the preliminary injunction action on June 22 and June 23. During this time, both the FTC and Microsoft/Activision will present their arguments on why the injunction should be approved (a pro-FTC decision) or should be denied (a pro-merger decision).

A Microsoft spokesperson provided the following quote on the decision:

"Accelerating the legal process in the U.S will ultimately bring more choice and competition to the gaming market. A temporary restraining order makes sense until we can receive a decision from the Court, which is moving swiftly."

Judge Corley has previously denied a preliminary injunction for a previous case that saw the merger being challenged by private parties in federal court. In

the Demartini et al v. Microsoft Corporation case, 10 consumers and gamers have banded together in an attempt to sue to block the Microsoft-Activision merger on the basis of harm from the post-merger combination. This private case was held in the same North California District Courts as the FTC's request.

Judge Corley ruled that legal counsel for the 10 gamers had not adequately proven harm, and therefore their preliminary injunction was not granted in that specific case.

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NEWS SOURCE:courtlistener.com

Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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