Demartini v. Microsoft Corporation

Background

Recreational video game players sued Microsoft Corporation under Sections 7 and 16 of the Clayton Act, challenging Microsoft’s proposed acquisition of Activision Blizzard, Inc. Microsoft announced the proposed $68.7 billion acquisition in January 2022. Activision develops and publishes Call of Duty.

The plaintiffs alleged that Microsoft would make Activision’s gaming content exclusive, or partly exclusive, to Microsoft’s platforms and services, harming rival platforms. They were concerned that Call of Duty could become exclusive to Microsoft platforms or subscription services, and that future Call of Duty titles could become more expensive. The plaintiffs currently play the game on various platforms, including PlayStation, Xbox, and Windows personal computers, and stated that the game’s availability affects their platform-purchasing decisions and their ability to play with friends.

The plaintiffs sought a preliminary injunction, which is a temporary court order intended to prevent likely harm before a final decision. The Federal Trade Commission had separately authorized an administrative challenge to the proposed merger. The court had previously dismissed the plaintiffs’ original complaint with permission to amend; the plaintiffs then filed an amended complaint and sought the injunction.

Legal standard

To obtain a preliminary injunction, a plaintiff generally must show a likelihood of success on the merits, a likelihood of irreparable harm without the injunction, that the balance of hardships favors the plaintiff, and that the injunction serves the public interest. Under Section 16 of the Clayton Act, a private plaintiff also must show an immediate threat of personal loss or damage. Irreparable harm means harm that cannot adequately be repaired later.

Court’s analysis

The court assumed, without deciding, that the plaintiffs had shown a likelihood of success on the merits. It therefore focused on whether they had shown an immediate likelihood of personal irreparable harm.

The court found that the plaintiffs’ declarations plausibly showed they could personally be affected if Microsoft made Call of Duty exclusive to its platforms or subscription services. They might need to buy a different console or subscription service, or pay a higher price, to continue playing the game. But the court assumed, without deciding, that those injuries would be irreparable and concluded that they were not likely to occur immediately.

First, the court found no evidence that the merger would make the versions of Call of Duty the plaintiffs already owned stop working. The plaintiffs could therefore continue playing those versions with their friends immediately after the merger in the same way as before.

Second, the court found that the record did not show it was likely that Microsoft would make a new version of Call of Duty exclusive to Microsoft before a decision on the merits. The possibility that Microsoft might violate its written agreements was not enough to establish an immediate threat of irreparable harm. The court noted that if Microsoft later announced an intent to make Call of Duty exclusive despite those agreements, the plaintiffs could seek a preliminary injunction at that time.

The court also rejected the plaintiffs’ argument that likely anticompetitive effects alone established irreparable harm. A likelihood of success on the merits does not automatically establish the separate requirement of immediate irreparable harm. The court further found that the plaintiffs had not shown that any possible future injury could not be undone, particularly because Activision would continue to exist as a Microsoft subsidiary after the merger and divestiture could remain available as a remedy.

Disposition

The court DENIED the plaintiffs’ motion for a preliminary injunction. It held that the plaintiffs had not met their burden to demonstrate an immediate threat of personal irreparable harm before a trial and final decision on the merits. The order did not decide whether the proposed merger violated the Clayton Act.