FTC Files Lawsuit To Block Microsoft's Acquisition Of Activision Blizzard

(RTTNews) - Microsoft's (MSFT) planned acquisition of Activision Blizzard (ATVI) is facing another obstacle as the Federal Trade Commission has filed a lawsuit seeking to halt the deal.

The FTC is requesting a permanent injunction and temporary restraining order to prevent the software behemoth from completing the $69 billion acquisition until the commission concludes its own legal proceedings against the merger.

In its initial lawsuit filed in December 2022, the FTC argued that the acquisition would enable Microsoft to suppress competition in the gaming industry, particularly with its Xbox gaming consoles and growing subscription content and cloud-gaming business.

While Microsoft would be able to proceed with the acquisition during the legal battle, the federal lawsuit would halt the finalization of the deal until the FTC's case is resolved.

The lawsuit states that if the acquisition goes through, Microsoft would gain control over Activision's content, allowing them to potentially withhold or degrade it, leading to reduced competition in terms of product quality, price, and innovation. This loss of competition could significantly harm consumers in multiple markets at a critical time for the industry, according to the suit.

Brad Smith, Microsoft's Vice President, expressed the company's willingness to present its case in federal court, emphasizing that expediting the legal process in the United States would ultimately foster more choice and competition in the market.

In a letter to employees, Activision Blizzard CEO Bobby Kotick stated that the FTC's lawsuit would enable the company to present the facts of the case swiftly. He expressed confidence in their legal team, which has been preparing for this situation for over a year, and reassured employees about keeping them informed throughout the process.

The UK's Competition and Markets Authority has also opposed the merger, citing concerns about Microsoft's increased dominance in the gaming industry. Microsoft is currently appealing this decision.

The acquisition of Activision Blizzard would be a significant boost for Microsoft's gaming business, as the company would gain access to popular franchises like "Call of Duty" and incorporate them into its Xbox Game Pass subscription service. The addition of Activision Blizzard's games to the service would enhance Microsoft's position in the gaming market, particularly in cloud gaming, where it already holds a significant share.

Additionally, Activision Blizzard's mobile gaming line, including the popular game "Candy Crush Saga," would provide Microsoft with a foothold in the rapidly growing mobile gaming space.

While Microsoft still has the opportunity to overcome the FTC's lawsuit, the commission is unlikely to make it easier for the tech giant. This regulatory challenge adds to the growing pressure faced by major tech companies, with reports suggesting that European Union regulators are planning to target Alphabet's ad tech business, focusing on the legality of the unit that contributes a significant portion of Google's revenue.

Google's ad sales accounted for approximately $225 billion out of the $278.6 billion online advertising market in 2022, and the European Union's anticipated antitrust complaint against Google highlights the scrutiny faced by dominant players in the industry.

As the legal battles unfold, the outcomes of these cases will have far-reaching implications for the gaming and advertising sectors, potentially reshaping the competitive landscape and future market dynamics.