Microsoft Corp.’s protracted, circuitous bid to acquire Activision Blizzard Inc. not only changed the gaming market but most likely upended potential future moves by federal regulators to block vertical deals, a central tenet of their antitrust campaign against Big Tech in the past few years.
Of 24 billion-dollar tech deals since 2013, 20 are classified as vertical transactions, according to market researcher Dealogic.The mantra among Big Tech seems to be “merge now while you can,” because the law makes it hard to derail vertical deals. “It is almost near impossible,” Abiel Garcia, former deputy attorney general for the state of California, said in an interview.
Microsoft-Activision is the latest example of a case that courts “have not bought into,” Garcia said, out of a reluctance to make precedent-setting decisions on vertical deals that would most likely to be overturned on appeal. Until that happens, the acquisition machine continues to run unabated. This year, Alphabet Inc.’s GOOGL, +0.54% GOOG, +0.45% Google, Apple Inc. AAPL, +0.48% and Meta Platforms Inc. have gobbled up nearly 200 companies in deals that were not reported because they don’t meet the $111. 4 million threshold established by the FTC under Section 7A of the Clayton Act.
The software giant, which was ensnared in an antitrust saga with the Justice Department in the 1990s and early 2000s, made several compromises to get the current deal approved. It agreed to offer ongoing access to “Call of Duty,” one of Activision’s flagship games, on digital platforms from other companies such as Sony Group Corp. 6758, -1.02% and Nintendo Co. 7974, -0.29%. Additionally, Microsoft said it will license part of Activision’s business with cloud gaming to a rival in the U.K.
Despite its latest setback in court and even as the Microsoft-Activision deal closed, the FTC intends to proceed with its challenge of the merger, according to a spokeswoman who deemed the deal a “threat to competition.”