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WASHINGTON (Reuters) -The U.S. Federal Trade Commission asked a federal court on Thursday to order Microsoft (NASDAQ:MSFT) to hold off on closing its $69 billion purchase of “Call of Duty” maker Activision Blizzard (NASDAQ:ATVI).
A federal judge had ruled for Microsoft on Tuesday, saying the agency had failed to show the deal would be illegal under antitrust law. The FTC appealed that loss late on Wednesday, and Microsoft has said it would fight that appeal.
In its motion, the FTC asked for an order preventing the deal from closing until after the 9th U.S. Circuit Court of Appeals ruled on a separate stay request filed with that court.
Any outstanding regulatory hurdle makes it more likely the agreement between Microsoft and Activision will expire on July 18 without the deal having been completed. After July 18, either company will be free to walk away from the deal unless they negotiate an extension.
The FTC asked for the court to decide on the pause as soon as possible, noting that an existing temporary restraining order on the deal ends just before midnight on Friday.
Shares of Microsoft and Activision were little changed by the news. Microsoft closed up 1.6% and Activision ended down 0.5%.
Microsoft showed no sign of backing down.
“We’re disappointed that the FTC is continuing to pursue what has become a demonstrably weak case, and we will oppose further efforts to delay the ability to move forward,” said Microsoft President Brad Smith in an emailed statement.
In its motion for the pause to Judge Jacqueline Scott Corley, the FTC argued her denial of a preliminary injunction to halt the deal “raises serious, substantial issues for the Court of Appeals to resolve.”
The FTC said it was seeking a preliminary injunction to temporarily stop the deal until an internal FTC judge could assess it. But Corley applied the standard needed to permanently stop the deal instead, which, the agency argued, was inappropriate.
“Granting an injunction pending appeal is warranted because the FTC is likely to succeed on appeal,” the agency wrote.
The FTC said the judge also erred in assessing the deal effect on multigame subscriptions and in how much credit she gave Microsoft for striking deals with rivals in order to save the proposed transaction.
To address the agency’s concerns, Microsoft had agreed to license “Call of Duty” to rivals, including a 10-year contract with Nintendo, contingent on the merger closing.
“More fundamentally, the Court committed an error of law when it relied upon the self-serving testimony of Microsoft executives that they do not intend to foreclose rivals as a reason to find the FTC had failed to make its prima facie case,” the FTC wrote in its motion.
The deal, the largest in the history of the videogame industry, was also struggling in Britain until this week. After the ruling in California, Britain’s Competition and Markets Authority, which had opposed the transaction, said a restructured deal between Microsoft and Activision Blizzard could satisfy its concerns, subject to a new investigation.
It is rare for a merger fight to go to an appeals court. That said, the FTC appealed a ruling more than 10 years ago when it lost its fight against Whole Foods’ purchase of Wild Oats. That fight eventually settled.
