FTC v. Microsoft: all the news from the big Xbox courtroom battle

The FTC called Microsoft’s Xbox Game Pass price hike “exactly the sort of consumer harm” it had predicted ahead of the company’s Activision-Blizzard buy.

Microsoft’s response (PDF) claims that with included multiplayer and the upcoming day-and-date release of Call of Duty, the offering isn’t degraded at all.

Microsoft has responded to the FTC’s claims that Microsoft laying off 1,900 Activision Blizzard and Xbox employees runs counter to its representations in court. “Activision was already planning on eliminating a significant number of jobs while still operating as an independent company,” says Microsoft lawyers in a new filing today. The FTC is still appealing a district court’s decision not to block Microsoft’s Activision Blizzard acquisition.

Here’s Microsoft spokesperson Becca Dougherty on the FTC’s filing:

In continuing its opposition to the deal, the FTC ignores the reality that the deal itself has substantially changed. Since the FTC lost in court last July, Microsoft was required by the UK competition authority to restructure the acquisition globally and therefore did not acquire the cloud streaming rights to Activision Blizzard games in the United States. Additionally, Sony and Microsoft signed a binding agreement to keep Call of Duty on PlayStation on even better terms than Sony had before.

The Federal Trade Commission complained to a federal appeals court on Wednesday that Microsoft’s layoff of 1,900 employees in its video games division went against its representations in court as it fought to acquire Activision Blizzard.

The move undermines Microsoft’s claims that the companies would continue to operate independently, the FTC said, and will make it harder to get “effective relief” if the agency succeeds in its administrative proceeding.

The Federal Trade Commission (FTC) is appealing a district court’s decision not to block Microsoft’s Activision Blizzard acquisition. Microsoft finalized its $68.7 billion deal in October, but the FTC’s Ninth Circuit Court of Appeals hearing starts tomorrow. Now 37 venture capital firms and investors are opposing the FTC’s appeal, claiming it “threatens the cycle of investment and entrepreneurship that drives America’s innovation economy.” The FTC is also planning to continue its administrative process against the acquisition.

That hasn’t stopped the US District Court for the Northern District of California, though. After a massive leak of Microsoft’s Xbox roadmap earlier today, the District Court has now deleted all of the evidence in the FTC v. Microsoft case from its website. The FTC has also made it clear this leak was Microsoft’s mistake. Oops.

When Microsoft was considering future release titles to bring to Game Pass last May, Larian’s hit CRPG Baldur’s Gate 3 barely made the list. The game was described as a “Second-run Stadia PC RPG” in leaked emails from the FTC v. Microsoft case.

The explosive overnight popularity of Baldur’s Gate 3 must be pretty embarrassing in hindsight, especially given its absence on Xbox.

It’s not about profits. When asked if Game Pass could have prevented studio closures in a leaked email from the FTC v. Microsoft case, the Microsoft Gaming CEO said that closures are “almost always” because of “leadership leaving (Lionhead as an example) or team just losing its passion (Ensemble as an example).”

The UK’s Competition Appeal Tribunal has agreed, with some requirements that need to be satisfied on Thursday, to pause Microsoft’s appeal of the CMA decision to block the Activision Blizzard merger. Both the CMA and Microsoft requested this last week, to allow them to negotiate over a cloud gaming deal. The CMA has also extended the date for its final order from July 18th to August 29th, so it’s likely that Microsoft’s deal will tick past the July 18th deadline and could see a temporary extension.

The FTC has filed an appeal over its loss of FTC v. Microsoft with the Ninth Circuit Court of Appeals. It also wants an emergency injunction to temporarily block Microsoft from closing its Activision Blizzard deal until there’s a ruling on the appeal.

Microsoft has now responded to the FTC’s motion, arguing that “the FTC’s claimed emergency is entirely of its own creation,” because the FTC didn’t seek an injunction through federal court until six weeks before the deal close.

Microsoft also claims the FTC could have filed its request for emergency relief earlier, as Judge Corley sent a copy of the ruling to both the FTC and Microsoft on Monday July 10th.

“The Court should not mistake the FTC’s litigation gamesmanship for an emergency meriting this Court’s deviation from the ordinary appellate process,” says Microsoft in its filing.

If the Ninth Circuit Court of Appeals doesn’t grant this emergency injunction then Microsoft is free to close its Activision Blizzard deal after 11:59PM PT tonight, once the temporary restraining order, put in place by Judge Corley, expires.

Finally, Microsoft says the FTC has committed “the cardinal sin of antitrust: mistaking competitive disadvantage for a particular competitor (Sony) with harm to competition and consumers.”

We’ve been waiting on this one. The UK’s Competition Appeal Tribunal (CAT) is handling Microsoft’s appeal of the Competition and Markets Authority’s (CMA) ruling on its proposed Activision Blizzard acquisition. Things are now starting to get moving at the CAT.

A case management conference has been called for Monday July 17th at 2:30PM UK time “to consider the application made jointly by all parties to adjourn these proceedings pending further discussions between the CMA and Microsoft.”

Both the CMA and Microsoft have agreed to pause their legal battles to negotiate how the transaction might be modified in order to address the CMA’s cloud gaming concerns.

Earlier today the CMA issued a notice of extension for its overall investigation into the deal, moving the date for a final order from July 18th to August 29th. The extension arrived just hours after Bloomberg reported that Microsoft is considering selling its UK cloud-gaming rights to a telecommunications, gaming, or internet company to allow the Activision deal to close with the CMA.

The CAT’s case management conference could reveal some details on what Microsoft is proposing, but it’s also possible that Microsoft will have closed its Activision Blizzard deal by then — providing the Ninth Circuit Court of Appeals doesn’t extend a temporary restraining order (TRO) that’s currently preventing Microsoft from closing its deal until 11:59PM PT tonight.

All eyes are now firmly on Monday.

Stephen Totilo from Axios has spotted an interesting aside in Xbox CFO Tim Stuart’s testimony. Apparently Microsoft had expected to sell 10 million units of both Starfield and Indiana Jones on PlayStation, but that if it took them exclusive “it could offset losses incurred” through increased Game Pass subscriptions and console sales.

The situation is changing daily as we approach the key July 18th deal deadline. After the FTC lost its request for a preliminary injunction earlier this week the regulator has filed an appeal. Judge Jacqueline Scott Corley set the expiration date of a temporary restraining order (TRO) preventing Microsoft from closing its deal to 11:59PM PT for Friday July 14th. This means the Ninth Circuit Court of Appeals has very little time to rule on the FTC’s appeal.

The FTC wants the Ninth Circuit Court to grant emergency relief to extend the temporary restraining order until when the appeals court can rule on the preliminary injunction decision. If granted, this will block Microsoft from closing its proposed Activision Blizzard acquisition until the court can make a full decision. If the Ninth Circuit Court doesn’t grant an extension before 11:59PM PT today then Microsoft is free to close the deal over the weekend or early next week.

But there’s still the matter of the UK.

The Competition and Markets Authority in the UK are now negotiating with Microsoft. Both the CMA and Microsoft have agreed to pause their legal battles to figure out how the transaction might be modified in order to address the CMA’s cloud gaming concerns. The CMA blocked Microsoft’s deal earlier this year, citing competition fears in the emerging cloud gaming market.

The CMA has just issued a notice of extension for its overall investigation into the deal, moving the date for final undertakings or a final order from July 18th to August 29th. The extension comes hours after Bloomberg reported that Microsoft is considering selling UK cloud-gaming rights to a telecommunications, gaming, or internet company to allow the Activision deal to close with the CMA.

The extension could mean Microsoft and the CMA aren’t quite ready to make a final deal in time for the July 18th deal deadline. The CMA also warned this week that Microsoft’s proposals may “lead to a new merger investigation” and that discussions with Microsoft were at an early stage.

All eyes are now on the Ninth Circuit Court and the situation with the CMA in the UK.

The Competition and Markets Authority in the UK has just issued a notice of extension in its investigation of Microsoft’s proposed acquisition of Activision Blizzard. The CMA was due to accept final undertakings or make a final order by July 18th, but thanks to fresh negotiations with Microsoft it has now extended that by six weeks to August 29th. “However, the Inquiry Group aims to discharge its duty as soon as possible and in advance of this date,” says CMA group chair Martin Coleman.

The extension comes hours after Bloomberg reported that Microsoft is considering selling UK cloud-gaming rights to a telecommunications, gaming, or internet company to allow the Activision deal to close with the CMA. The UK regulator originally blocked the deal in April over cloud gaming concerns.

Bloomberg says Microsoft and Activision Blizzard are only “considering giving up” those UK rights, but I suspect it might genuinely work if they do.

The CMA’s primary remaining objection to the $68.7 billion deal was a fear that Microsoft would make Activision games exclusive to its own cloud gaming service. (There’s a bit more to it, but still.) If Microsoft permanently removed its own ability to do so...