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UPDATE 1-US FTC tries again to stop Microsoft's already-closed deal for Activision

(Recasts to reflect the day's legal proceedings, adds comments by experts, paragraphs 3, 5, 8-14)

By Diane Bartz

WASHINGTON, Dec 6 (Reuters) - U.S. antitrust enforcers argued on Wednesday that a federal judge got it wrong when she ruled that Microsoft's $69 billion deal to buy "Call of Duty" maker Activision Blizzard was legal under competition law, in their latest attempt to stop the deal.

Microsoft closed the deal on Oct. 13 after winning approval from British regulators. The deal was originally proposed in January 2022 as the biggest acquisition in the history of the gaming industry.

Speaking for the Federal Trade Commission, lawyer Imad Abyad argued that the lower-court judge held the agency to too high a standard, effectively requiring it to prove that the deal was anticompetitive.

He told a three-judge appeals court panel in California that the FTC had only to show that Microsoft had the ability and incentive to withhold Activision's games from rival game platforms to prove the agency's case.

He said the FTC "showed that in the past that's what Microsoft did," referring to allegations that Microsoft made some Zenimax games exclusive after buying that company.

The FTC is fighting an uphill battle, given that it lost the lower-court fight and that the EU and Britain have signed off on the deal.

The legal battle is part of a broader push by the Biden administration to fight mergers and price hikes that affect consumers in areas ranging from medicines to airline tickets.

Speaking for Microsoft, lawyer Rakesh Kilaru called the FTC case "weak" and said that the agency had asked the lower-court judge for too much leeway. "It is also clear that the standard can't be as low as the FTC is suggesting," he said. "It can't be kind of a mere scintilla of evidence."

He argued that the agency failed to show that Microsoft had an incentive to withhold "Call of Duty" from rival gaming platforms.

The judges actively questioned both attorneys, with Judge Daniel Collins pressing the FTC's attorney on how concessions that Microsoft gave British antitrust enforcers affect the U.S. market.

He also appeared to take issue with Abyad's assertions that more analysis of the deal was necessary, especially since Microsoft had struck agreements with rivals recently, including one with Sony this past summer.

"This was not a rush job on the part of the FTC," he said.

Two antitrust scholars who listened to the arguments said the FTC faced a tough slog to prevail.

A finding of "clear error" by a lower court judge is "really stark,” said Alden Abbott, a former FTC general counsel, comparing it to the idea that a court ignored key evidence from a witness. Abbott said the appeals court noted that the trial judge had considered "a huge amount of record evidence."

The FTC filed a lawsuit aimed at stopping the deal in December 2022, arguing that Microsoft would use Activision's popular games to suppress competition to its Xbox consoles and dominate fast-growing subscription and cloud gaming businesses. But a federal judge in California ruled in July that it failed to make its case.

(Reporting by Diane Bartz and Mike Scarcella in Washington Editing by Matthew Lewis)