The National Trade Commission has sued to block Microsoft from completing its deal to buy video game company Activision Blizzard, the latest antitrust challenge to the proposed merger but one that could hasten its conclusion.
The FTC’s Monday filing in a San Francisco federal court seeks a temporary restraining order and injunction to stop Microsoft’s $69 billion acquisition of the California company behind hit games such as Call of Duty, World of Warcraft, and Candy Crush.
Microsoft, the maker of the Xbox game system, has been struggling to obtain global approval for the deal just over a month before the deadline to close it, according to the agreement it signed with Activision. While many countries have approved the acquisition, regulators for two major economies—the U.S. and the United Kingdom—have argued that it could stifle competition in the video game industry.
“We welcome the opportunity to present our case in federal court,” said a statement on Monday from Phil Spencer, Microsoft’s vice chair and president. “We believe extending the legal process in the U.S. will ultimately bring more choice and competition to the market.”
Activision CEO Bobby Kotick, in a letter to employees, also described Monday’s FTC filing as a “positive development” because the companies would be able to more efficiently present their arguments to a federal judge.
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The FTC already took Microsoft to court last year to block the merger, but that case was brought to the U.S. agency’s in-house judge in a trial set to begin on August 2. That administrative process didn’t prevent the parties from closing the deal.
The agreement between Microsoft and Activision based on the deal is expected to close by July 18, but the FTC’s latest action seeks to prevent that from happening. If Microsoft completes the deal now and an FTC judge later finds it to be illegal, it “would be difficult, if not impossible” to unwind, the FTC said in seeking a judge for a preliminary injunction to halt the acquisition.
For example, the FTC said, the merged companies could begin altering Activision’s operations and game development, access sensitive information, and eliminate key personnel.
“Microsoft and Activision Blizzard have stated in the past that they cannot consummate their deal due to antitrust reviews of the transaction in proposed jurisdictions,” the FTC said in a statement on Monday. “However, Microsoft and Activision Blizzard have not provided assurances that they will maintain that posture. In light of these, and public reporting that Microsoft and Activision Blizzard are contemplating closing their deal imminently, we have filed a request for a temporary restraining order to prevent them from closing while the review continues.”
One of Microsoft’s thorniest obstacles is in the U.S., where antitrust regulators made a surprise decision this spring to block the acquisition.
The all-cash deal announced in January 2022 has been scrutinized by regulators around the world over fears that it would give Microsoft and its Xbox console control of Activision’s hit franchises and give it an unfair boost in the emerging business of cloud-based game subscriptions. It could be the priciest tech industry merger in history.
Strong opposition has been driven by rival Sony, which makes the PlayStation gaming console.
Microsoft sought to counter the resistance by striking a deal with Nintendo to license Activision titles like Call of Duty for a decade and offering the same to Sony if the deal went ahead.
European regulators representing the 27-nation bloc approved the deal last month on condition that Microsoft make certain assurances designed to boost competition in the cloud-based gaming market. Other countries, including China, Japan, Brazil, and South Korea, have also approved it.
But the blockbuster deal has remained in jeopardy because of the decision by the U.K.’s Competition and Markets Authority and the ongoing case in the U.S.
Microsoft in late May filed an appeal of the British regulator’s decision and has voiced strong public opposition aimed at top government officials. If Microsoft were to close the deal without Britain’s approval, it could face new legal challenges there or potentially choose to suspend its broader gaming business in the country.
U.S.-based consumer advocacy group Public Citizen, a critic of the deal, welcomed the FTC’s move on Monday.
“Microsoft is pushing to consummate the acquisition of Activision before the agency can finish its process,” said a statement from Public Citizen’s competition policy advocate Ellen Kent. “By filing in federal court to enjoin the acquisition, the FTC is showing that it won’t back down in the face of Microsoft’s escalatory tactics.”
