FTC Aims to Block Microsoft’s Activision Acquisition

Microsoft’s Activision Acquisition.- Microsoft’s planned $75 billion acquisition of Activision Blizzard is being challenged by the Federal Trade Commission (FTC), which has requested a federal court to intervene and prevent the deal from closing. The FTC’s move comes after reports surfaced suggesting that Microsoft was considering finalizing the acquisition despite legal opposition in the United States and the United Kingdom. To obtain the injunction, the FTC will need to present evidence supporting its claim that the deal is unlawful.

Brad Smith, Microsoft’s Vice Chair and President, expressed his willingness to present their case in federal court and emphasized that the legal process in the United States would ultimately lead to more competition and consumer choice. Following the news, Microsoft’s stock rose by 1.5%, while Activision’s shares experienced a slight decline of 0.8%.

Microsoft announced the acquisition plans in January 2022, valuing it at $69 billion, considering Activision’s net cash. The deal, initially scheduled for completion in the coming month, has encountered opposition from the FTC, which argues that Microsoft would gain excessive control over access to Activision’s games, potentially resulting in increased prices or restricted access for non-Microsoft users.

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The FTC initially filed a lawsuit against the deal in December, but did not seek an emergency order to halt the acquisition at the time due to the closing date being several months away. FTC has scheduled a trial in its in-house court for early August, and it will proceed alongside the parallel process seeking an injunction.

The FTC contends that issuing an injunction is crucial to prevent Microsoft from making alterations to Activision’s operations and business plans, accessing sensitive information, eliminating key personnel, changing game development efforts, and entering new contractual relationships on behalf of Activision. The agency argues that failure to halt the deal before the trial could cause harm to competition in the interim.

Should the injunction be denied, it would pose a challenge to the FTC’s claim that the Microsoft-Activision deal is illegal. While the FTC could continue its in-house lawsuit, it frequently drops its opposition if a judge does not grant an injunction. Microsoft is also facing obstacles in the U.K., as the country’s Competition and Markets Authority rejected the merger proposal in April, citing concerns over negative impacts on the cloud-gaming market and reduced innovation and choice for U.K. gamers. Microsoft has filed an appeal, but experts suggest that overturning the decision will be challenging.

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Despite these obstacles, Microsoft and Activision argue that the acquisition would enhance competition in the global video game industry. Microsoft has made commitments to ensure equal accessibility to Activision games for rival console makers and cloud-gaming companies over a ten-year period. The European Union has already approved the deal, while regulators in other markets, including China and Saudi Arabia, have also given their approval.

Users are expected to drive the growing popularity of cloud gaming, a streaming service that allows them to access video games over the internet without the need for dedicated consoles or gaming computers. Microsoft’s acquisition of Activision would significantly boost its video game revenue, as Activision generated $7.53 billion in sales in 2022, while Microsoft reported $16.23 billion in video game revenue for the fiscal year through June.