US sues Microsoft to block takeover of Activision

The regulator said the deal, which could close within the next few days, could "substantially lessen competition" in the video games industry.

Microsoft first announced its multi-billion deal to buy Activision in January 2022, which would see the company acquire hit titles such as Call of Duty and Candy Crush. The deal has been hailed as the “biggest takeover in tech history” and is already the largest acquisition in the history of the video game industry, at least in theory at this stage.  

The news follows moves from the UK's competition authority, which blocked the sale in April, as it would “alter the future of the fast-growing cloud gaming market”, fearing Microsoft would make the Activision games exclusive to its existing cloud gaming platform, Xbox Game Pass, cutting off distribution to other key players in the space.

The UK decision has been appealed by Microsoft and a final decision is pending.

However, the deal has been approved by European Union officials, who stressed that Microsoft has offered to provide 10-year free licensing deals of Activision PC and console games to competitors. For this reason, the two companies could technically go ahead with the takeover outside of the US.

In filing its legal challenge, the FTC expressed concerns that Microsoft could potentially close the deal abroad before any legal case was resolved in the US.

The FTC originally filed to block the deal in December 2022 and has now resorted to seeking a temporary restraining order and an injunction to stop Microsoft from closing the deal, citing rumours that the companies may attempt to do so despite the ongoing litigation.

“Both a temporary restraining order and a preliminary injunction are necessary because Microsoft and Activision have represented that they may consummate the proposed acquisition at any time,” the FTC’s complaint reads.

The FTC said the deal would give Microsoft the "ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition." 

The regulators also stressed that, without an injunction, the combined firm "could alter Activision’s operations and business plans," and could allow the software giant to access sensitive business information.

“We welcome the opportunity to present our case in federal court,” said Brad Smith, Microsoft’s vice chair and president, in a statement. “We believe accelerating the legal process in the US will ultimately bring more choice and competition to the market.”

Activision Blizzard CEO Bobby Kotick expressed a similar view n a public email addressed to employees, saying that Monday’s actions were “a positive development in our merger progress” because it “accelerates the legal process.”

Earlier this year, Microsoft made headlines after launching a revamped version of its search engine Bing, powered by the popular AI chatbot ChatGPT. The news followed an announcement that the global company would be cutting 10,000 jobs in the latest round of redundancies to hit the tech industry.