Microsoft's deal to buy Call of Duty maker boosted by US judge

The chances of Microsoft taking over major games publisher Activision Blizzard have been given a big boost after a US judge rejected a request from US regulators to block the deal.

Microsoft said after the US win it would focus on resolving concerns in the UK.

The tech giant's merger with the Call of Duty owner would be the biggest deal of its kind in gaming industry history.

Shares in Activision surged more than 10% as investors bet it would succeed.

In the US regulators had argued that such a deal, valued at $69bn (£56bn) last year, would hurt gamers and reduce competition by giving Microsoft, maker of the Xbox, the power to deny rivals access to Activision's games.

The Federal Trade Commission (FTC) had sought an emergency block of the deal, which is due to close later this month, while it challenged the plans.

But Judge Jacqueline Scott Corley said she did not think the regulator would win in its case.

"The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets," Judge Scott Corley wrote in her decision, delivered after a week-long hearing in San Francisco.

The ruling in the US is the strongest indicator so far that the tech giant's purchase will eventually go forward.

It comes after the deal was approved by the European Union, while a bid to block the merger in the UK is currently under appeal.

Microsoft president Brad Smith said the company was "grateful" for the quick decision and would now turn its focus to the UK.

He and the UK's Competition and Markets Authority said the two sides had agreed to put litigation on hold while the company figured out a way to address the concerns, which had focused on the cloud gaming market.

"We stand ready to consider any proposals from Microsoft to restructure the transaction in a way that would address the concerns set out in our final report," a spokesperson for the CMA said.

The developments appear poised to deliver a major win for Microsoft, which is trying to keep up with market leaders PlayStation and Nintendo by investing heavily in gaming content that might encourage players to choose its platforms, including the Xbox console, over its rivals.

Activision Blizzard is responsible for major titles including Call of Duty, World of Warcraft, Diablo and Overwatch, and also owns King, the mobile games developer responsible for Candy Crush.

The fate of the Call of Duty franchise was key to regulators' arguments.

Arguing on the side of regulators, PlayStation boss Jim Ryan had said in a video deposition that Microsoft would be likely to restrict access to the series for PlayStation users, or offer them a degraded version.

However, Microsoft said it had offered a 10-year licensing agreement to Sony for the game and argued that it would make no financial sense to restrict access to such a massive following.

"Our merger will benefit consumers and workers. It will enable competition rather than allow entrenched market leaders to continue to dominate our rapidly growing industry," Bobby Kotick, chief executive of Activision Blizzard, said after the ruling.

In a message to staff shared by the company he added: "We're optimistic that today's ruling signals a path to full regulatory approval elsewhere around the globe, and we stand ready to work with UK regulators to address any remaining concerns so our merger can quickly close."

The decision in the US is not necessarily the end of the process. The FTC can appeal the ruling. It has also separately challenged the merger in a parallel process running in administrative court.

"We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles," FTC spokesperson Douglas Farrar said. "In the coming days we'll be announcing our next step to continue our fight to preserve competition and protect consumers."

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