The U.S. Federal Trade Commission (FTC) has filed a lawsuit against Microsoft to prevent it from acquiring Activision Blizzard. The FTC is seeking a temporary restraining order and a preliminary injunction to stop the deal from going through.
The FTC argues that the acquisition would harm competition in the video game industry. Microsoft is the world's largest gaming company, and the acquisition of Activision Blizzard would give it control of a large number of popular gaming franchises, including Call of Duty, World of Warcraft, and Candy Crush.
“Plaintiff Federal Trade Commission, by its designated attorneys, petitions this Court to enter a temporary restraining order and grant a preliminary injunction enjoining Defendants Microsoft Corp. and Activision Blizzard, Inc. from consummating their proposed acquisition or a similar transaction,” the filing reads.
“Both a temporary restraining order and a preliminary injunction are necessary because Microsoft and Activision have represented that they may consummate the Proposed Acquisition at any time [redacted] without any further notice to the Commission. A preliminary injunction is necessary to maintain the status quo and prevent interim harm to competition during the pendency of the FTC's administrative proceeding to determine whether the Proposed Acquisition violates U.S. antitrust law. A temporary restraining order is necessary to maintain the status quo while this Court decides whether to grant the requested preliminary injunction.”
FTC: Microsoft Could Gain an Unfair Cloud Gaming Advantage
According to the FTC, the deal would give Microsoft an unfair advantage in the gaming industry, and would harm competition and consumers. The FTC also claims that the deal would reduce innovation and diversity in the gaming market, and would eliminate a potential rival to Microsoft's cloud gaming ambitions.
In the filing, the FTC alleges that Activision Blizzard was planning to launch its own cloud gaming service, which would compete with Microsoft's Xbox Cloud Gaming service, but that Microsoft's acquisition would prevent that from happening.
The FTC is seeking a temporary restraining order and a preliminary injunction to prevent Microsoft from closing the deal, pending a full trial. The FTC says that it has conducted an extensive investigation into the deal, and that it has received complaints and concerns from various stakeholders, including game developers, publishers, distributors, and consumers.
A Microsoft spokesperson told WinBuzzer the company has responded to the filing, with the Microsoft's president offering the following statement:
“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.” – Brad Smith, Vice Chair and President.
Global Regulators Split on the Impact of the Deal
The acquisition of Activision Blizzard would be Microsoft's largest-ever deal and would make it the world's second-largest game maker behind Nintendo. Activision Blizzard has more than 400 million monthly active players across its franchises, which also include Call of Duty, Candy Crush, Hearthstone, World of Warcraft, and Overwatch.
Microsoft has seen the deal accepted by many global regulators. Among them is the European Commission, which is notoriously strict on Big Tech companies. Japan's regulator has also approved the deal, despite concerns about how it would impact local gaming giants Sony and Nintendo.
South Korea, China, and Brazil are other notable markets that have approved the acquisition. However, the Competition and Market Authority (CMA) in the UK rejected the deal, blocking it from happening in the country. Microsoft is now appealing that decision and has suggested it would simply not offer Activision games in the UK if the CMA does not change its mind.
It is unlikely a similar threat would work in the US. While the UK is a big market, Microsoft could manage to lose it if the deal went ahead globally. However, the company would not be able to lose the economic gains from the US if the FTC wins its legal battle. In other words, the final decision on whether this merger happens or not will come from the US.
You can keep track of all aspects of this deal, past, present, and future by checking out our Microsoft Activision Blizzard merger timeline stories. Alternatively, check out Microsoft's official hub.