The Federal Trade Commission (FTC) on Wednesday asked a federal court to pause Microsoft from completing its acquisition of Activision Blizzard, arguing that the deal would harm competition in the video game market. With this move, the regulator is making formal a request that was first reported earlier this month.
Reuters reports that the FTC filed a motion for a preliminary injunction in the U.S. District Court for the District of Columbia, alleging that the deal would give Microsoft control of an unfair proportion of the games market.
The FTC's complaint argues that the deal would allow Microsoft to “raise prices, reduce innovation, and stifle competition” in the video game market. Also, the agency also alleges that the deal would harm consumers by reducing the number of choices available to them.
Microsoft has argued that the deal would not harm competition and would instead benefit consumers by allowing Microsoft to invest in new games and services. The company has also said that it would create new jobs and boost innovation in the video game industry. A hearing on the FTC's motion for a preliminary injunction is scheduled for July 18.
Why is the FTC opposed to the deal?
The FTC filed a lawsuit against the deal in its in-house court in December 2022, alleging that it would substantially lessen competition in the video game industry and harm millions of consumers4.
Amongst the concerns the regulator has are:
- Microsoft would have the incentive to raise prices, restrict access or degrade quality of Activision's games on rival platforms such as Sony's PlayStation and Nintendo's Switch.
- The deal would reduce innovation and diversity in the video game market, by eliminating an independent competitor and creating a dominant player with significant market power.
- The deal would harm competition in cloud gaming services, by giving Microsoft an unfair advantage over rivals such as Sony, Google, and Amazon.
Microsoft's Hit and Miss Success with Regulators
If Microsoft buys Activision Blizzard, it will be its largest deal ever and it will become the second-biggest game maker in the world after Nintendo. More than 400 million monthly active players enjoy Activision Blizzard's franchises, which include Call of Duty, Candy Crush, World of Warcraft, and Overwatch. The deal is awaiting approval from the FTC, which is expected to announce its decision by the end of this year.
Microsoft has been left awaiting the FTC's verdict on its $69 billion bid for Activision Blizzard. The deal would make Microsoft a gaming powerhouse, but it could also fall apart if the FTC says no. Microsoft has won over many regulators around the world who have given the green light to the deal. Even the tough European Commission has said yes, despite its reputation for cracking down on Big Tech. Japan has also given its blessing, despite the potential threat to its own gaming legends Sony and Nintendo.
But not everyone is happy with the deal. The UK's CMA has slammed the brakes on the deal, saying it would hurt competition and innovation in cloud gaming. Microsoft is fighting back, appealing the decision and threatening to pull Activision games from the UK market if the CMA doesn't budge.