ON MONDAY, the US Federal Trade Commission asked a court to temporarily block Microsoft Corp’s (MSFT.O) acquisition of Activision Blizzard (ATVI.O), arguing the deal would harm the video game industry. The agency urged a judge to issue a temporary restraining order and preliminary injunction to prevent the companies from consummating the deal until it can challenge it in an administrative court. A trial for that proceeding is scheduled to begin Aug. 2.
The FTC, the government’s antitrust enforcement arm, said it was concerned that if Microsoft had control of Activision’s extensive gaming franchises, including hit titles like Call of Duty and Overwatch, it could unfairly use its market power to deny gamers choice or raise prices. The agency also argued that it was worried the merger would lead to less competition in the sale of computer and console gaming systems.
Microsoft and Activision had signaled the deal could close as soon as Friday, and the two companies have said they intend to finalize the transaction despite the ongoing investigation by the FTC. The company has also said it plans to appeal any decision by the court. The FTC’s request for a temporary restraining order and a preliminary injunction came after press reports “indicate that defendants may seek to close the proposed acquisition even though it is not yet clear whether the Commission’s complaint will prevail” in its administrative proceeding, the agency said in its court filing.
Those reports cited speculation that Microsoft could take steps to avoid antitrust scrutiny by lowering game quality or player experience on rival consoles like Nintendo’s Switch and Sony’s PlayStation, manipulating pricing, or restricting access to Activision games. The agency argues such actions could result in “significant harm to competition” for consumers in multiple markets at high costs for the companies and their competitors.
The agency’s case against the deal is a rare move for its antitrust unit as it grapples with a series of setbacks in recent years, as judges have struck down many of its efforts to limit corporate power. In this case, a decision could send a strong message that the Biden administration is willing to take more aggressive action to restrain large technology companies.
Microsoft has defended its bid for Activision as a way to better compete with Nintendo, Sony, and other video game makers, which are trying to attract new players by offering cheaper consoles, more online gaming options, and easier ways to buy games on a variety of platforms. The acquisition could help Microsoft boost sales of its Xbox consoles and software.
The company also faces stiff competition from other tech giants in the gaming space, such as Google and Amazon, which offer competing online services to let people play video games on computers and mobile devices. Earlier this month, the European Union’s antitrust watchdog approved the deal, saying that Microsoft’s concessions were enough to address its concerns. The company’s stock closed up 1.5% connected on Monday, while shares of Activision fell 0.8%.