The U.S. Federal Trade Commission today filed suit to prevent Microsoft Corp. from completing its proposed purchase of Activision Blizzard Inc. for $68.7 billion.
Santa Monica, California-based Activision Blizzard develops a series of popular video games with 368 million monthly active users. Last quarter, the company generated operating income of $485 million on $1.78 billion in revenue. Should its acquisition of Activision Blizzard complete, Microsoft estimates that it would become the third-largest video game developer by revenue.
The FTC argues in its newly filed lawsuit that allowing the acquisition to complete would harm market competition. Specifically, the agency believes that the deal would negatively impact Microsoft rivals in two areas: the video game console and cloud gaming segments.
Activision Blizzard’s games are available on multiple platforms. Its games can run on Microsoft’s Xbox video game consoles, as well as on consoles made by competitors. The FTC argues that Microsoft could stop offering Activision Blizzard’s games on consoles that compete with its Xbox devices if the $68.7 billion acquisition goes through.
The company could limit rivals’ ability to compete in other ways as well, according to the FTC. Microsoft could degrade the quality of Activision Blizzard’s games on competing consoles or change their pricing to favor its own Xbox devices. Additionally, the FTC is concerned that the tech giant may limit the availability of Activision Blizzard games on cloud gaming services that compete with its Xbox Cloud Gaming offering.
The FTC pointed to Microsoft’s 2021 acquisition of ZeniMax Media Inc., another video game developer, as one of the considerations behind its lawsuit. The acquisition was valued at $7.5 billion. According to the FTC, Microsoft made several ZeniMax games available exclusively on its platforms despite earlier commitments to launch them on rival systems as well.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, the Director of the FTC’s Bureau of Competition. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”
In response to the lawsuit, Microsoft Brad Smith stated that “we continue to believe that this deal will expand competition and create more opportunities for gamers and game developers. We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC.”
Microsoft’s proposed Activision Blizzard acquisition also faces scrutiny abroad. The U.K.’s antitrust regulator, the Competition and Markets Authority, referred the transaction to an in-depth Phase 2 antitrust investigation earlier this year. Additionally, the transaction faces an antitrust probe in the European Union.
Earlier this month, Reuters reported that Microsoft will likely offer to change some acquisition terms in order to address EU regulators’ antitrust concerns. The company is expected to submit the proposed changes within weeks.