FTC files lawsuit to block Microsoft’s Activision Blizzard acquisition alleging the deal violates antitrust laws

The U.S. Federal Trade Commission announced on Thursday that it is filing a lawsuit against Microsoft for its proposed acquisition of Activision Blizzard. The complaint alleges that the deal is in violation of antitrust laws governing company mergers and could lessen competition.

The FTC's four-member panel voted, 3-1, to block the proposed acquisition with a legal challenge. It confirmed in a press release that Commissioner Christine Wilson, the sole Republican on the panel, was the only member to vote against the filing of a complaint.

In the redacted copy of the antitrust case, the FTC argues that the proposed Microsoft-Activision Blizzard merger violates Section 7 of the Clayton Act. It is the main federal antitrust law in the U.S. that the FTC commonly uses to block mergers that it deems could create a monopoly and have the potential to substantially lessen competition.

The FTC also cited Microsoft’s actions from previous acquisitions, particularly its $7.5 billion deal with Bethesda’s parent company ZeniMax, as showing its capacity to “suppress competition.” And the commission argues that allowing the proposed merger with Activision Blizzard would give Microsoft “a substantially increased incentive” to do the same with the publisher's IPs like “Call of Duty.”

This presents a major roadblock for Microsoft’s proposal to acquire Activision Blizzard, but the company still has a chance to defend the proposed merger. Microsoft is now required to submit a response in 14 days, where it has to provide “specific admission, denial, or explanation of each fact alleged in the complaint.”

When Microsoft and Activision Blizzard announced the all-cash $69 billion transaction last January, both companies were expecting the deal to be finalized by mid-2023. But the latest move of the FTC, if it would not lead to fully blocking the merger, is likely to change that timeline.

The complaint indicates that an evidentiary hearing before an Administrative Law Judge will take place no later than Aug. 2, 2023. Meanwhile, companies involved in the merger came out with separate statements maintaining their confidence that the deal would be approved eventually.

“We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC,” Microsoft president Brad Smith said. “While we believe in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present it in court.”

Activision Blizzard CEO Bobby Kotick told employees in a memo that the FTC’s lawsuit may sound alarming, but he remains confident that the deal will be approved. “The allegation that this deal is anti-competitive doesn't align with the facts, and we believe we’ll win this challenge,” Kotick added.

Photo by Jonathan Kemper on Unsplash