The Federal Trade Commission (FTC) has officially filed a lawsuit aiming to halt Microsoft’s proposed acquisition of video game giant Activision Blizzard. This legal action marks the latest chapter in an ongoing antitrust challenge to the $69 billion merger, a situation that has already seen various regulatory hurdles. By seeking a temporary restraining order and an injunction in a federal court in San Francisco, the FTC is intensifying its scrutiny of this significant transaction, which involves popular gaming franchises like Call of Duty, World of Warcraft, and Candy Crush.
Microsoft, the creator of the Xbox gaming system, is racing against the clock to secure global regulatory approvals, with a deadline for closing the deal looming just over a month away. While several countries have given their blessing, major economies such as the United States and the United Kingdom remain concerned about potential competitive disadvantages arising from the merger.
Brad Smith, Microsoft’s vice chair and president, expressed the company’s readiness to defend its case in court. He stated, “We welcome the opportunity to present our case in federal court. We believe accelerating the legal process in the U.S. will ultimately bring more choice and competition to the market.” Similarly, Activision’s CEO Bobby Kotick described the FTC’s lawsuit as a “positive development,” emphasizing that it would allow both companies to expedite their arguments before a federal judge.
Regulatory Scrutiny and Industry Implications
The FTC had previously attempted to block the merger, with the prior case set to begin trial before an internal judge on August 2. However, that process did not prevent the merger from closing. The FTC’s latest lawsuit aims to ensure that if Microsoft and Activision were to complete the acquisition before legal conclusions were reached, reversing the decision would be extremely challenging.
The FTC has voiced concerns that the merger could lead to significant operational changes within Activision, including potential shifts in game development and personnel. “Microsoft and Activision Blizzard have represented in the past that they cannot close their deal due to antitrust reviews in other jurisdictions,” the agency noted. Given reports suggesting that the companies were contemplating a rapid closure of the deal, the FTC felt compelled to intervene.
One of the significant barriers facing the merger is in the U.K., where antitrust regulators unexpectedly blocked the acquisition earlier this year. The all-cash deal, which was announced in January 2022, has faced scrutiny globally over fears it could enable Microsoft to dominate key gaming franchises and gain an unfair advantage in the burgeoning cloud gaming market. If successful, it would potentially become the most expensive merger in the tech industry’s history.
Sony, a rival company that produces the PlayStation gaming console, has been one of the most vocal opponents of the deal. In response to the resistance, Microsoft has sought to negotiate agreements with other companies, including Nintendo, to license Activision titles such as Call of Duty for ten years, extending similar offers to Sony if the acquisition is approved.
European regulators recently approved the merger, albeit with conditions aimed at ensuring fair competition in cloud gaming. Meanwhile, countries like China, Japan, Brazil, and South Korea have also greenlighted the deal, but the ongoing disputes in the U.S. and U.K. continue to cast uncertainty over its future.
As Microsoft appeals the U.K. regulator’s decision, the company has publicly criticized top government officials. If Microsoft proceeds to close the deal without the necessary approvals from British regulators, it could invite additional legal challenges and potentially jeopardize its gaming business in the U.K.
Consumer advocacy group Public Citizen has praised the FTC’s recent legal maneuvers. “Microsoft is pushing to culminate the purchase of Activision before the agency can finish its process,” said Matt Kent, a competition policy advocate for Public Citizen. “By filing in federal court to enjoin the transaction, the FTC is showing that it won’t back down in the face of Microsoft’s escalatory tactics.”
Source : https://www.usnews.com/news/best-states/washington/articles/2023-06-12/ftc-sues-to-block-microsofts-takeover-of-video-game-maker-activision-blizzard