By Jeffrey Levine, JD, PhD – Associate Clinical Professor, Department of Sport Business Esport Business Program Lead, Drexel University
(Editor’s Note: The following was shared from Esports and the Law, a periodical by Hackney Publications available on a complimentary subscription basis at www.esportsandthelaw.com)
The U.S. Federal Trade Commission (FTC) has ended one of the most consequential antitrust battles in the video game industry. On May 22, 2025, the Commission dismissed its in-house case against Microsoft’s $68.7 billion acquisition of Activision Blizzard, citing that further litigation was no longer in the public interest (Perlman, 2025a; Godoy, 2025). The move followed the Ninth Circuit’s decision two weeks earlier affirming a lower court’s refusal to block the deal. With the case dismissed, Microsoft has cleared its last major legal hurdle in a fight that has spanned more than three years.
How We Got Here: District Court, Appellate Battles, and FTC’s Decision to Drop Challenge
The FTC first sued in December 2022 pursuant to Section 7 of the Clayton Act, which prohibits mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly” (FTC v. Microsoft Corp., 2023, p. 1083) The FTC argued that Microsoft’s acquisition would give it the ability and incentive to foreclose rivals in three markets: high-performance consoles, multi-game subscription services, and cloud gaming (FTC v. Microsoft Corp., 2023). In June 2023, the Commission sought a preliminary injunction in the Northern District of California to stop the deal from closing while its administrative trial proceeded.
After a five-day evidentiary hearing, Judge Jacqueline Scott Corley denied the FTC’s motion on July 10, 2023. She found that the FTC had not shown a likelihood of success in proving substantial harm to competition (Koenig, 2023). Her ruling emphasized several points, including the following: (1) Microsoft’s Board relied on a valuation model assuming continued sales on PlayStation and other platforms, undercutting a foreclosure theory; (2) Microsoft pledged at the merger’s announcement to keep Call of Duty on existing platforms and expand its reach; (3) Call of Duty’s success hinged on cross-platform play and large multiplayer communities, making exclusivity economically irrational; (4) Microsoft entered into binding agreements to license Call of Duty to Sony, Nintendo, and various cloud services; and (5) Microsoft argued it would suffer serious reputational harm if it pulled Call of Duty from PlayStation (FTC v. Microsoft Corp., 2023).
The FTC appealed. On May 7, 2025, the Ninth Circuit unanimously affirmed Corley’s ruling (FTC v. Microsoft Corp., 2025). Writing for the panel, Judge Daniel P. Collins explained that vertical mergers do not carry a presumption of illegality and that the FTC failed to make a fact-specific showing that the proposed merger was likely to create anticompetitive effects. The court found the FTC failed to show Microsoft had an incentive to withhold Call of Duty, and noted evidence of reputational and economic downsides to doing so.” (Perlman, 2025b).
Having lost in both district and appellate courts, the FTC was left with only its in-house case. But pursuing an administrative trial to unwind a merger that had closed in 2023 presented steep hurdles. By May 2025, the agency’s leadership had shifted: new Chair Andrew Ferguson signaled that the Commission would redirect its resources toward other priorities, including cases aligned with the Trump administration’s enforcement agenda (Godoy, 2025). Against this backdrop, the FTC dismissed its case, formally ending its challenge.
Microsoft President Brad Smith called the decision “a victory for players across the country and for common sense in Washington” (Perlman, 2025a, para. 4).
Legal and Practical Implications for Esports and Gaming
This saga provides several important legal markers for the industry. First, the courts reaffirmed that vertical mergers require a fact-specific showing of probable harm, not presumptions based on market share or speculative theories (FTC v. Microsoft Corp., 2025). This may invite future deals between publishers, developers, and platforms. Second, both decisions emphasized the importance of cross-platform play and reputational harm as economic deterrents to exclusivity. For esports ecosystems built around titles like Call of Duty, this provides reassurance that core competitive communities are unlikely to be fractured by platform lock-ins.
The Microsoft-Activision case offers potential guidance for the esports and gaming industry. First, although large vertical merger and acquisition deals will be scrutinized, courts require concrete evidence of likely harm. Companies considering acquisitions should prepare to highlight pro-competitive outcomes such as expanded access or consumer benefits, as highlighted in both opinions. Second, maintaining broad, cross-platform availability is not only good for community trust but now carries legal significance. Firms risk economic losses, reputational harm, and perhaps the legal high ground if they pursue exclusivity in ways that undermine player ecosystems. Third, the rulings highlight subscription and cloud services as pro-competitive opportunities, suggesting that adding major titles to these platforms can expand access and reduce costs of buying individual game titles. As Judge Corely noted, “Adding Call of Duty to Game Pass gives consumers a new, lower cost way to play the game day and date” (FTC v. Microsoft Corp, 2023, p. 1098). Finally, while the FTC’s retreat signals a shift in enforcement priorities under current leadership, companies should not assume lasting freedom. Political change can quickly alter regulatory focus, but the legal lessons from this case remain durable.
Conclusion
The FTC’s decision to drop its challenge to the Microsoft-Activision merger marks the end of a landmark case. While the Commission lost in court, the litigation clarified the standards for evaluating vertical mergers in gaming and reaffirmed the commercial and reputational logic of cross-platform availability. For esports and gaming professionals, the message is clear: strategic growth is anchored in cross-play, scale, and thriving player communities. Exclusivity, once a tool of competitive differentiation, now risks reputational damage and shrinking ecosystems when applied to flagship titles. Looking ahead, companies that pair growth strategies, including expansion into subscription and cloud services, with commitments to openness and access will be best positioned to withstand both regulatory scrutiny and the demands of an increasingly interconnected player base.
References
FTC v. Microsoft Corp., 681 F. Supp. 3d 1069 (N.D. Cal. 2023).
FTC v. Microsoft Corp., 136 F.4th 954 (9th Cir. 2025).
Godoy, J. (2025, May 22). FTC drops case over Microsoft’s $69 billion Activision Blizzard deal. Reuters. https://www.reuters.com/sustainability/boards-policy-regulation/ftc-drops-case-over-microsofts-acquisition-activision-blizzard-2025-05-22/
Koenig, B. (2023, July 11). Microsoft bid to close Activision deal clears key FTC hurdle. Law360. https://www.law360.com/articles/1696342/microsoft-bid-to-close-activision-deal-clears-key-ftc-hurdle
Perlman, M. (2025a, May 23). FTC finally drops challenge to Microsoft-Activision deal. Law360. https://www.law360.com/articles/2343870/ftc-finally-drops-challenge-to-microsoft-activision-deal
Perlman, M. (2025b, May 7). 9th Circ. affirms FTC loss in Microsoft-Activision case. Law360. https://www.law360.com/articles/2336965
