FTC sues to block Microsoft, Activision Blizzard gaming merger

(CN) — The Federal Trade Commission sued both Microsoft and Activision Blizzard on Monday in an attempt to stop the tech giant from closing on a $69 billion deal to acquire the major video game developer.

The suit is only the FTC’s latest effort towards preventing the merger between Microsoft, maker of the game console system Xbox, and the developer of blockbuster game franchises like Call of Duty and World of Warcraft.

Prompted by indications from the companies that “they may consummate the proposed acquisition at any time," Monday’s filing in the U.S. District Court of Northern California asks the court for a preliminary injunction and temporary restraining order by Thursday.

The agency first protested the acquisition in administrative court in December, arguing against the potential damages to the video game market the deal could usher in, but did not initiate any action to prevent the companies from closing on their proposed deal. Trial for that proceeding is set to begin Aug. 2.

“With control of Activision’s content, Microsoft would have the ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition — including competition on product quality, price and innovation,” the FTC said in its most recent suit. “This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”

Microsoft first announced plans to acquire Activision Blizzard in January 2022. The deal would give Microsoft control over Activision’s extensive game properties, including hit franchises like Call of Duty, Overwatch and Candy Crush.

If approved, the plan would become the largest video game acquisition deal in history and make Microsoft the world’s third largest gaming company. The deadline for the massive deal comes at the end of June.

“We welcome the opportunity to present our case in federal court,” said Brad Smith, Microsoft’s vice chair and president, in a statement. “We believe accelerating the legal process in the U.S. will ultimately bring more choice and competition to the market.”

Microsoft has faced opposition to the acquisition outside of the U.S. as well. Antitrust regulators in the United Kingdom blocked the deal in April, naming concerns about how the merger would affect the cloud gaming market. Microsoft is appealing the decision.

The deal, however, has cleared the antitrust hurdle in dozens of other countries. The European Commission and China’s State Administration for Market Regulation have recently approved the acquisition, as have regulators in Japan, South Korea and Brazil.

Like British regulators, the FTC argues that a Microsoft and Activision merger would undermine competitors in console and cloud gaming subscription markets. Rivals — like Nintendo and Microsoft’s main competitor Sony, whose PlayStation competes directly with Xbox — would be disadvantaged by Microsoft potentially withholding Activision titles from them.

The FTC points to Microsoft’s March 2021 acquisition of ZeniMax, parent company of well-known game developer Bethesda.

“Shortly after the [European Commission] cleared the transaction, Microsoft made public its decision to make several of the newly acquired ZeniMax titles, including Starfield, Redfall and Elder Scrolls VI, Microsoft exclusives,” the FTC states in the suit.

If the deal goes through, even temporarily without preliminary relief granted, the FTC says that it risks Microsoft being able to “among other things, begin altering Activision’s operations and business plans, accessing Activision’s sensitive business information, eliminating key Activision personnel, changing Activision’s game development efforts and entering into new contractual relationships on behalf of Activision.”

Activision Blizzard comes with its own controversial history. The game publisher faced a slew of sexual harassment and employment discrimination lawsuits in 2021 following extensive claims of mistreatment by women who had worked with the company. Activision agreed on a $18 million settlement with the SEC in 2022.

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