FTC Sues to Block Microsoft's Activision Blizzard Acquisition

The Federal Trade Commission (FTC) has sued to block Microsoft's proposed $68.7 billion acquisition of Activision Blizzard, according to a report by The Washington Post.

Per The Washington Post, the FTC voted Thursday on a party-line vote to issue the lawsuit in administrative court, with the three Democrats in favor of the complaint and one Republican against it. The commission is reportedly charging that the deal would allow Microsoft to "suppress its competitors in gaming."

"Microsoft has already shown that it can and will withhold content from its gaming rivals," Holly Vedova, director of the FTC’s Bureau of Competition, said in a press release. "Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets."

Activision Blizzard executive, Lulu Cheng Meservey, posted a response on Twitter.

"The FTC's job is to protect consumers, not competitors," Meservey said. "This vote departs from precedent but the law hasn't changed. Any claim the deal is anticompetitive ignores facts; the deal benefits gamers and the industry, especially given competition from abroad. We look forward to proving our case in court and closing our deal with Microsoft."

Subject to customary closing conditions and the completion of regulatory review, the proposed transaction was expected to close in Microsoft’s fiscal year ending on June 30, 2023.

If the transaction closes, Microsoft would become the world’s third-largest gaming company by revenue, behind Tencent and Sony.

Of course, the major question mark remains as to whether or not Microsoft is able to convince regulators to approve the transaction.

In February, it was reported that the FTC would lead the review of Microsoft's planned deal, an agency that has assumed a more aggressive stance on mergers in the tech space.

FTC Chair Lina Khan has advocated for harsher anti-trust reviews, especially among tech company mergers. Khan has already led the FTC to sue to block two major takeovers: Nvidia's proposed purchase of semiconductor company Arm Ltd., and weapons company Lockheed Martin's deal to buy rocket manufacturer Aerojet Rocketdyne Holdings.

The FTC's investigation of the Microsoft-Activision deal was said to focus on the former's console and PC manufacturing capabilities, the latter's game development and publishing, and whether Microsoft owning Activision Blizzard would harm other gaming companies by limiting their access to major Activision Blizzard franchises.

In April, four U.S. senators sent a letter to the FTC urging it to closely inspect Microsoft's proposed acquisition, warning the deal could undercut pushes for accountability over the latter's reported culture of sexual harassment and gender-based discrimination.

Microsoft has recently announced a series of moves made in hopes of showing regulators that the deal would not give it an unfair advantage in the gaming market or harm workers. On Tuesday, Microsoft Gaming CEO Phil Spencer revealed that Microsoft has entered a 10-year commitment to bring Call of Duty to Nintendo systems if the merger were to go through.

In August, Sony reportedly claimed to CADE that Xbox acquiring Call of Duty would be anti-competitive.

As reported by Bloomberg in February, the current Call of Duty deal between Sony and Activision Blizzard is believed to remain in place for the franchise's next three releases, including this year's Modern Warfare II and Warzone 2.0, as well as CoD 2024.

In September, The Verge reported that Microsoft Gaming CEO Phil Spencer had provided a signed agreement to PlayStation CEO Jim Ryan and Sony to guarantee Call of Duty would remain on PlayStation for "at least several more years" beyond their current contract.

Ryan then put out a statement that Microsoft's offer to keep Call of Duty on PS platforms "was inadequate on many levels," before personally visiting the European Union headquarters on Sept. 8 to voice PlayStation's concerns over the deal.