Not even a full day after appealing its loss in the Microsoft Activision court case, the US Federal Trade Commission is pushing for a new, temporary injunction which would stop the deal from closing until its appeal receives a ruling.
A new motion for injunction pending appeal was filed earlier today, July 13, with the FTC calling on the court to stop Microsoft from closing the Activision deal until it can finish its review of the merger, which is separate from this case and still ongoing. "In the alternative," the FTC adds, it's seeking an injunction until its pending appeal is evaluated by the court.
The news comes on the heels of Activision preparing to withdraw from the US stock exchange's top 100 index, signaling that it's confident the Microsoft deal will close soon – theoretically as soon as a few days, with the revised restraining order on Microsoft now set to expire on July 14.
The FTC's argument this time is that the wrong legal standard was applied to its initial push for a preliminary injunction. The crux is that it believes "the Court applied the standard applicable to trials on the antitrust merits, relying on government cases seeking permanent injunctions."
The important difference here is about the burden on the plaintiff and the responsibility of the court. In the case of a permanent injunction, the FTC writes, "federal district courts bear the responsibility for determining the antitrust merits in the first instance; there is no separate administrative proceeding to follow." However, its preliminary injunction needed only to "raise 'serious, substantial' questions as to the merits' of the acquisition."
"That is decidedly not the standard applicable to this preliminary proceeding, and the Court erred in holding the FTC to the standard applicable to a full trial on the merits of a vertical merger," the FTC says.
The filing also claims the court "erred as a matter of law" in several judgments, including the impact of Xbox Game Pass potentially becoming the only subscription service with access to Call of Duty, Microsoft's incentive to fully foreclose (that is, withhold content from) versus partially foreclose competitors, and the relevance of Microsoft's many agreements with competing cloud services.
On that last point in particular, the FTC argues that "the Court instead simply assumed from the existence of the agreements and offers that they are procompetitive ... and ignores the evidence that the offer does not remedy the potential harms to competition in the console market."
There's also repeated mention of the court assigning the FTC the task of "producing a smoking gun document." The FTC says it not only does not need to submit such documents to "contradict a company's self-serving statements made in the shadow of litigation," but that it did present a smoking gun anyway in the form of Microsoft testament and analysis regarding the revenue shift that would be required to offset foreclosing PlayStation. The FTC's basically arguing that even considering this raises questions about Microsoft's intent, but claims the court ignored this.
In so many words, the FTC is trying once again to pump the brakes on the Activision deal, in no small part because it argues "the FTC and the public interest will be irreparably harmed if the merger is allowed to proceed." It has been only a few days since the ruling and we are already knee-deep in legal hair-splitting, so buckle up for the days, if not weeks, ahead.
The UK CMA remains opposed to the merger, which is a serious obstacle to global closure, but it has acknowledged that Microsoft and Activision may modify the deal to address its concerns.
