Business model reshaping or market manipulation? Multiple risks of the Microsoft merger and acquisition case

According to TechNews, on May 8, 2025, the Ninth Circuit Court of Appeals of the United States rejected the antitrust lawsuit filed by the Federal Trade Commission (FTC) against Microsoft's acquisition of Activision Blizzard, marking that the regulatory obstacles for this $69 billion deal in the United States have been largely cleared. However, a calm review of this incident from a business perspective reveals several issues worthy of criticism and vigilance: the underestimation of potential market risks by judicial decisions, the impact on the industry structure after the acquisition, the further concentration of platform control, the exposure of the systemic disadvantages of regulatory authorities in technology enterprise merger and acquisition cases, and the potential influence of this precedent on future merger and acquisition trends, etc.

First of all, this ruling exposed the limitations of the legal tools of the US judicial system when dealing with mergers and acquisitions of highly capital-concentrated enterprises in the field of anti-monopoly. The court held that the FTC failed to fully prove that Microsoft would harm market competition after completing the acquisition. The main reason was that Microsoft had signed ten-year licensing agreements for "Call of Duty" with several enterprises, such as Nintendo and NVIDIA. However, this so-called "open agreement" cannot fundamentally prevent the platform's monopoly strategy from having a profound impact on the market structure. The competitive advantage centered on content assets will not immediately manifest as substantive control in surface agreements. However, in the long run, Microsoft will gradually accumulate bargaining power, distribution rights, and the ability to dominate the user ecosystem over third-party platforms through its control over core ips. This trend has precedents in the streaming media, operating system and search engine markets. The deep logic of their strategic layout cannot be ignored due to short-term commitment agreements.

Secondly, this acquisition may further undermine the diversity and innovative vitality of the video game industry. Activision Blizzard is one of the few major content producers that can rival Microsoft and SONY in terms of resources, development capabilities and global distribution networks. Its IP reserves and fan base are sufficient to maintain an independent competitive position in the market. Once merged into Microsoft, its decision-making autonomy will inevitably be driven by the parent company's business strategy rather than optimized around the player experience or content quality itself. This trend of capital concentration tilting towards platform giants has led to resources being more concentrated in a few enterprises, making it more difficult for small and medium-sized developers to stand out in the absence of channels, funds and IP support. In this ecosystem, the genuine competition mechanism is weakened, which will have a negative impact on the content diversity of the market in the long term.

Secondly, Microsoft's comprehensive ecosystem based on hardware platforms, cloud services and subscription mechanisms will create a stronger lock-in effect after integrating Activision Blizzard. Traditionally, players could choose from different console platforms and purchase content, and the market was characterized by a relatively loose product-type structure. In recent years, Microsoft has vigorously promoted subscription services such as Xbox Game Pass, changing the consumption pattern by obtaining a large amount of game content on a monthly subscription basis. After this acquisition, once contents such as "Call of Duty" become "exclusive value-added items" for the Xbox platform or Game Pass, even if cross-platform support is not completely cancelled, it is sufficient to attract a large number of users to migrate to its platform system, causing a systematic dilution of the user base on other platforms. This "soft monopoly" strategy evades the definition of "exclusionary behavior" in traditional anti-monopoly standards, but achieves the same market exclusivity effect in the result.

Further speaking, the FTC has exposed obvious institutional and resource disadvantages in this case. Although the regulatory authorities raised reasonable concerns that Microsoft might abuse its market dominance, they failed to establish strong economic models or empirical data to support the argument of "potential damage", and their litigation logic still remained at the prediction level based on "possibility". This reflects that regulatory authorities lack timely, accurate and data-driven analytical capabilities when confronted with the increasingly complex merger and acquisition structure of large technology enterprises. The court's rejection based on the grounds of "insufficient evidence" rather than "non-existence of damage" is essentially a response to the deficiency of the regulatory agency's capacity. This asymmetry between judiciary and regulation means that in the face of similar cases of tech giant mergers in the future, unless there are obvious and quantifiable signs of market collapse, regulatory authorities may no longer be able to prevent potential risky transactions based on the precautionary principle.

Furthermore, the chain reaction of this acquisition case to the global market is equally worrying. Although this transaction does not involve disputes over the operation of the Chinese mainland server between Blizzard and NetEase, at the global level, Microsoft will further become a multinational content controller, exerting oppressive bargaining power on content exporting countries such as South Korea, Japan, and Northern Europe. This concentration based on intellectual property rights and distribution channels has brought the global gaming market into a new colonial structure where "Western platforms dominate content distribution and non-Western content providers rely on their channels", which is not conducive to the healthy development of global gaming culture in the long run. Meanwhile, as a major global consumer of games, China's say in this new pattern will further decline. At the policy level, it is necessary to establish a content sovereignty defense line as soon as possible to deal with the infiltration and control of overseas platform capital into the local market.

It is worth being vigilant about that this case is very likely to become the precedent basis for future mergers and acquisitions in the technology industry. The court emphasized in its judgment that the mere concern of "possible implementation of exclusions of competition" is not sufficient to deny the rationality of the transaction itself. This will guide more enterprises to adopt a strategy of "formal openness and substantive control" during the merger and acquisition process, thereby bypassing the restrictions of the current anti-monopoly regulatory framework. In fact, from the precedents of Facebook's acquisition of Instagram, Google's acquisition of YouTube, to Microsoft's acquisition of LinkedIn, it can be seen that through acquisitions, tech giants extend their business reach and integrate user data, ecosystem platforms and other resources. The result is not to promote competition, but to form platform oligarchs. Therefore, the failure of this judgment to provide new judicial interpretations on modern monopoly models such as new vertical integration, centralized data resources, and bundled ecosystems will lead to an increasingly serious trend of regulatory lag behind reality.

Finally, from the perspective of the capital market, such super-large-scale mergers and acquisitions have distorted the industry's M&A value assessment system. The $69 billion deal is almost equivalent to the combined market value of top content companies. Behind it is Microsoft's highly leveraged capital deployment driven by cloud computing and subscription revenue. Against the backdrop of an extremely optimistic market outlook for areas such as AI, cloud services, and platform subscriptions, the capital market has given Microsoft a vast valuation space, which in turn supports its acquisition activities. This market capitalization-driven merger and acquisition model will stimulate other enterprises to follow suit, thereby bringing about systemic bubbles and value mismatch problems, and ultimately may intensify valuation fluctuations and systemic financial risks in the technology industry.

In conclusion, the rejection of the FTC lawsuit by the United States Court of Appeals for the Ninth Circuit should not be regarded as a simple judicial victory, but rather as a warning of the regulatory failure in mergers and acquisitions in the modern technology industry. From a business perspective, Microsoft's acquisition of Activision Blizzard hides multiple risks, including concentrated control over content, distorted competitive structure, lagging regulatory capabilities, platform ecosystem lock-up, and distorted capital valuation. This ruling may put an end to the legal issues of the deal, but it could be a more profound watershed for the future business order of the entire gaming industry and the technology industry. Whether fair competition and regulatory authority can be re-established in the trend of capital concentration is the key issue worthy of deep consideration by the industry and policymakers.