Microsoft complies with FTC in Activision buyout (because it has to)

Microsoft has complied with the Federal Trade Commission's request for more information regarding the Activision-Blizzard acquisition proposal, sources have told Seeking Alpha.

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The biggest gaming buyout in history could close by next month; By August 17, Microsoft could officially become the new owner of Activision-Blizzard, one of the most powerful and profitable video game publishers on the planet. Federal Trade Commission regulators in the United States are currently evaluating key documents, information, and details about both Microsoft and Activision-Blizzard in order to assess whether or not the megaton deal would be fair to investors, consumers, and the overall video games market.

The acquisition's regulatory process appears to be going smoothly and swiftly. Months ago, Microsoft company president Brad Smith confirmed the FTC had issued a Second Request--a step in the regulatory approval process where the FTC collects information on games, earnings, and everything else from both companies--and that the deal was moving fairly quickly.

"It's moving fast, at least fast enough for an acquisition of this size," Smith said at the time. "We're coming to the end of the beginning and now we're entering the beginning of the middle,"Microsoft's legal counsel told Smith.

Now sources are saying Microsoft and Activision-Blizzard have responded to the Second Request by delivering the necessary documents and information. As per the FTC's official website, there are up to five steps to acquisition deals in the United States. The $68.7 billion Activision-Blizzard buyout is currently in step #4.

1. Both parties create a filing
2. Deal is handed to either FTC or DOJ for review
3. Deal is passed or agencies issue Second Request
4. Both parties comply with Second Request, agency reviews data for 30 days (or longer as per agreement from parties)
5. Agency lets the deal go through or opposes it in court

While Second Request reviews can take up to 30 days, it is entirely possible for the FTC to file extensions so it can continue evaluating information and documents provided by both Activision-Blizzard and Microsoft. So it's more correct to say the deal could be approved in August at the earliest.

A Second Request typically asks for business documents and data that will inform the agency about the company's products or services, market conditions where the company does business, and the likely competitive effects of the merger. The agency may conduct interviews (either informally or by sworn testimony) of company personnel or others with knowledge about the industry.

Once the information is reviewed, the agencies can respond in three different ways:

1. Not objecting to the deal, in which the deal will go through
2. Issue provisions and changes to the deal, in which both parties can make adjustments
3. Oppose the deal with a court order (such in the case of NVIDIA's proposed buyout of ARM)

The FTC also has the power to request amends or changes the acquisition's terms, potentially removing some studios, games, or even projects from planned exclusivity deals.

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While both Microsoft and Activision-Blizzard investors have overwhelming approved of the buyout, the deal has faced opposition from those who claim ATVI shares are being purchased at a steep discount. In February 2021, before the scathing allegations of sexual abuse and misconduct rattled the games-maker, Activision-Blizzard shares were trading at $103.8, and shares tanked to $53 just months after the controversy broke out. Microsoft's deal offers $95 per share in cash value that culminates into a $68.7 billion buyout.

There's also the consideration that game exclusivity will cause material impact to competitors like Sony, who are expected to lose upwards of $260 million a year if Call of Duty products alone are withheld from the platform. We've also estimated that Microsoft could lose $1 billion or more keeping Call of Duty titles off of competing platforms.

• February 2022 - FTC starts scrutinizing and investigating the Activision-Blizzard buyout for possible anti-trust or anti-competitive market trends (Link)
• May 2022 - Microsoft president says Activision-Blizzard buyout deal is "moving fast" (Link)
• July 2022 - Microsoft complies with Second Request