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.
The Federal Trade Commission (FTC) had argued the $69bn (£54bn) merger would “substantially lessen competition”.
The decision is the strongest indicator so far that the tech giant’s purchase will eventually go forward.
It would be the biggest deal of its kind in gaming industry history.
In an increasingly competitive gaming market, Microsoft 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 device, over their rivals.
Activision Blizzard has a deep portfolio of very successful games that Microsoft wants to control.
The company 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 regulator concerns.
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.
Judge Jacqueline Scott Corley said the testimony delivered during a week-long hearing in San Francisco had left her unpersuaded that the FTC could prove its claims.
“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,” she wrote.
The ruling is not necessarily the end of the process. The FTC can appeal the decision. 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.”
In order for the deal to go through in its current form Microsoft and Activision need approval from the regulatory bodies in the US, EU and UK.
The US ruling comes after the deal was approved by the European Union, while a decision to block the merger in the UK is currently under appeal.
Microsoft president Brad Smith said the company had agreed with the UK’s Competition and Markets Authority to put “a stay on litigation in the UK” while the two sides figure out ways to modify the transaction to address concerns.
“After today’s court decision in the US, our focus now turns back to the UK,” he said. “While we ultimately disagree with the CMA’s concerns, we are considering how the transaction might be modified in order to address those concerns in a way that is acceptable to the CMA.”
Microsoft could have to pay a $3bn fee to Activision Blizzard if the deal does not go forward.
“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.
