FTC hearing to block Microsoft $69B acquisition of Activision concludes

A judge will now decide if the Federal Trade Commission can block Microsoft’s (NASDAQ:MSFT) $69 billion acquisition of Activision (NASDAQ:ATVI) after a five-day trial concluded. Activision ticked higher by 0.8% in after hours trading.

Lawyers for the FTC and Microsoft (MSFT) gave their closing arguments on Thursday in front of U.S. District Judge Jacqueline Scott Corley in San Francisco. The trial, which started last Thursday, included testimony from Microsoft CEO Satya Nadella as well as Activision (ATVI) CEO Bobby Kotick.

The FTC earlier this month filed for a preliminary injunction to block the acquisition of videogame behemoth Activision (ATVI), saying that the regulator feared Microsoft (MSFT) may try to close the purchase even though the FTC had originally challenged it in December.

The trial and its timing are crucial for the deal has a July 18 termination date soon approaches, where the parties can walk away, extend, or renegotiate the deal.

“All of this is for a shooter video game,” Judge Corley said on Thursday, referencing Activision’s “Call of Duty” game franchise. “We’re concerned about the competition for this one shooter video game.”

On Wednesday, Microsoft’s Nadella tried to dispel the FTC’s argument that the software giant would try to limit Activision (ATVI) content to its own Xbox platform and wouldn’t put it on rival platforms like Sony’s (SONY) PlayStation console.

“It makes no economic sense and no strategic sense,” to withhold Activision (ATVI) content from Sony’s (SONY) PlayStation console, Nadella said at the hearing. We “want to get our content on more platforms and become a fantastic first class publisher.”

Judge Corley also questioned the FTC lawyer whether the government would even be in court to block the deal if Sony (SONY) agreed to the 10-year deal Microsoft offered to put “Call of Duty” on Sony’s PlayStation.

“So if Sony actually had an agreement with Microsoft, the 10-year , keep `Call of Duty’ and future versions of `Call of Duty’ on PlayStation, and future versions of PlayStation, would we be here,” Corley asked.

The judge set Friday for findings of fact and plans to make her ruling at some point under seal.

“It was right at the end of the hearings that the judge reminded one of the FTC lawyers that it’s not the harm to Sony that she cares about; it’s any harm to consumers,” Chris DeMuth Jr, Partner of Rangeley Capital, said in an interview with Seeking Alpha. “The FTC would have been better off if she had explained this to them at the beginning. The FTC hardly mentioned consumers, let alone proved that they’d be harmed, while operating more as Sony lobbyists than as American law enforcers. It was a strange spectacle unlikely to be the first such vertical merger to be blocked this century.”

While the FTC trial is crucial, M&A investors are also keenly focused on the appeals court in the UK, where the country’s antitrust regulator blocked the deal earlier this year. A UK appeals court is set to hear the appeal on July 28.

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