The FTC is appealing the judge’s decision to allow Microsoft to buy Activision

The US Federal Trade Commission (FTC) said on Wednesday that it is appealing a federal judge’s ruling that Microsoft (MSFT.O) can move forward with its $69 billion purchase of “Call of Duty” maker Activision Blizzard. (ATVI.O).

Microsoft’s victory in court on Tuesday, and a subsequent reversal by the British competition authority, brought the tech giant two steps closer to ending its relationship with Activision, Microsoft’s largest-ever deal.

However, any pending regulatory hurdle makes it more likely that the agreement between Microsoft and Activision will expire on July 18th without completing the deal. After July 18, either company will be free to walk away from the deal unless they negotiate an extension.

The FTC court filing on the appeal did not provide any details, which will come before the Ninth Circuit Court of Appeals on the West Coast.

Microsoft said it would fight the appeal.

“We are disappointed that the FTC continues to pursue what has become a clearly weak case, and we will oppose further efforts to delay the ability to move forward,” Microsoft President Brad Smith said in an emailed statement.

The FTC declined to comment further on the notice of appeal.

While the companies succeeded on Tuesday in striking down a court injunction against completing the deal, the judge left leeway preventing them from doing so until Friday, to give the FTC time to appeal.

The FTC may request a stay from the Court of Appeals to stop closing the deal.

In her opinion, US District Judge Jacqueline Scott Corley in San Francisco rejected the Biden administration’s argument that the deal would harm consumers by giving Xbox game maker Microsoft exclusive access to games including the best-selling “Call of Duty.”

Britain’s Competition and Markets Authority, which opposed the deal, said on Wednesday that a restructured deal between Microsoft and Activision Blizzard might satisfy its concerns, subject to a new investigation.

“Maybe” or “will”?

U.S. legal experts disagreed on whether the FTC had good grounds to appeal, with some saying that appeals courts tend to defer to judges on the facts, and others saying that Judge Corley may have misidentified the standard for stopping a deal.

In her 53-page motion, Corley said it was not enough for the FTC to argue “a merger may reduce competition—the FTC must show that a merger is likely to significantly reduce competition.”

Legal scholars have questioned this standard, saying that US antitrust law requires the FTC to prove that a proposed deal “may” harm competition, not that it “would.”

To address the FTC’s concerns, Microsoft agreed to license “Call of Duty” to competitors, including a 10-year contract with Japan’s Nintendo Co (7974.T), contingent upon the merger closing.

When US antitrust agencies lose merger challenges in court, appeals are rare.

However, the FTC appealed a ruling more than 10 years ago when it lost its battle against Whole Foods’ purchase of wild oats. The agency settled with the companies before the Court of Appeal issued its decision.

Reporting by Diane Bartz. Editing by Diane Craft, Lincoln Feast and Muralikumar Anantharaman

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