The U.S. Federal Trade Commission will likely seek to block Microsoft Corp.’s proposed $68.7 billion acquisition of Activision Blizzard Inc., according to a new report.
Politico on Wednesday cited sources as saying that the FTC could file a lawsuit to block the deal as soon as next month. However, the sources cautioned that it’s not certain the agency will go ahead with the move. The FTC’s four commissioners have reportedly not yet voted on whether to file suit.
The report comes as the agency is said to be conducting an investigation into Microsoft’s proposed Activision Blizzard deal. As part of the investigation, FTC officials have reportedly taken depositions from Microsoft Chief Executive Officer Satya Nadella and Activision Blizzard counterpart Bobby Kotick. FTC officials are said to be skeptical of the companies’ arguments in favor of the acquisition.
The proposed $68.7 billion acquisition, which was announced at the start of the year, would be the largest in the tech industry’s history if approved. Currently, Dell Technologies Inc.’s $67 billion purchase of data center storage equipment maker EMC ranks as the industry’s most expensive acquisition.
Santa Monica, California-based Activision Blizzard develops a series of popular video games with more than 400 million active monthly users in 190 countries. Last year, the company’s video games generated more than $8 billion in revenue.
Acquiring Activision Blizzard would help Microsoft significantly grow its share of the video game market, where it already has a significant presence. Microsoft acquired video game publisher ZeniMax Media Inc. in 2021 for $7.5 billion. The technology giant also develops the popular Xbox series of video game consoles.
Politico reported that FTC officials are concerned Microsoft’s acquisition of Activision Blizzard could give the company an unfair boost in the video game market. The UK’s antitrust regulator, the Competition and Markets Authority, has also expressed concerns about the deal. Following an initial inquiry, the CMA in October referred the deal to a more detailed Phase 2 antitrust investigation.
Microsoft’s proposed Activision Blizzard deal is also drawing scrutiny from competitors. According to two of the sources cited by Politico, Google LLC has expressed concerns about the deal.
Microsoft provides a subscription service called Game Pass that offers access to a rotating catalog of video games. Google has reportedly argued that Microsoft deliberately lowered the quality of the Game Pass user experience on Chrome. According to the report, Google argued that Microsoft would have incentive to continue the practice should its proposed acquisition of Activision Blizzard be approved.
Sony Corp., which competes with Microsoft in the video game console market, is also opposed to the deal. Activision Blizzard has made its video game portfolio available on Sony’s PlayStation console series. In a statement sent to the UKCMA earlier this year, Sony argued that Microsoft would have an incentive to stop offering Activision Blizzard’s games on PlayStation consoles should the acquisition be approved.
Microsoft has stated that it expects to close the acquisition of Activision Blizzard by the end of next June. Should the acquisition be approved, Microsoft estimates that its video game business will be the third-largest in the industry by revenue.