The Federal Trade Commission (FTC) has filed a lawsuit to block Microsoft's planned acquisition of Activision Blizzard.

Last January, Microsoft announced its intention to buy Activision Blizzard, but according to a press release issued by the US watchdog, competitors of its Xbox game consoles and subscription content and cloud gaming business in rapid increase".

The redacted complaint (opens in a new tab) states that the merger would "significantly reduce competition or tend to create a monopoly in multiple markets." Simply put, it could give Microsoft control of certain markets due to a lack of competition.

Not only is the FTC concerned that the acquisition will create "a greater incentive to use [Microsoft's] control of Activision's titles to disadvantage Microsoft's competitors," but the complaint also details concerns about Microsoft's potential to manipulate the markets in the long term by adjusting Activision's prices. Microsoft has already announced plans to increase the price of Xbox exclusives in 2023.

The lawsuit is a critical hurdle in Microsoft's acquisition of Activision Blizzard, and could end up shutting down its purchase proposal.

(Image credit: Shutterstock/Alex Van Aken)

Much ado about nothing about everything

In recent years, Microsoft has loosened the strings on the corporate bag significantly; his $68.700 billion bid for publisher Call of Duty is just the tip of the iceberg. The FTC's lawsuit singles out Microsoft's most recent acquisitions as a cause for concern, should its proposed acquisition of Activision Blizzard go through.

"Microsoft's past conduct provides insight into the combined company's likely plans if it completes the proposed acquisition. [of Activision-Blizzard]despite any assurances the company may offer regarding its plans,” the complaint reads.

Its acquisition of ZeniMax, the parent company of triple-A studio Bethesda, is used as an example. This was a highly controversial purchase, but the FTC is referring to how Microsoft told the European Commission (EC) that they "would not have the incentive to retain ZeniMax titles from rival consoles."

But, shortly after the EC approved the deal, Microsoft made public its decision to make several of the newly acquired ZeniMax titles, including Starfield, Redfall, and Elder Scrolls 6, Microsoft exclusives.

This means that despite Microsoft's assurances to the EC and with pressure for Starfield to be a platform seller like Bethesda's first creation under Microsoft, the studio's upcoming titles won't debut on rival consoles after all. PS5 or Nintendo Switch.

We continue to believe that our agreement to acquire Activision Blizzard will broaden competition and create more opportunities for players and game developers. December 8, 2022

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a united front

Microsoft Chairman Brad Smith publicly responded to the lawsuit on Twitter (opens in a new tab), specifically addressing the FTC's concerns about Microsoft's potential use of the merger as a major market disruptor that could Eliminate your competitors at the source.

“We continue to believe that our agreement to acquire Activision Blizzard will broaden competition and create more opportunities for gamers and game developers,” read their first comment.

"While we believe in giving peace a chance, we have full confidence in our case and welcome the opportunity to present it in court," Smith said in a follow-up tweet (opens in a new tab).

Activision Blizzard also publicly responded to the lawsuit, with CEO Bobby Kotick News sending a letter to employees (opens in a new tab) and responding to some of the claims made in the lawsuit.

"I want to build my confidence that this deal will happen," Kotick said, echoing Smith's sentiment. "The charge that this deal is anti-competitive does not fit the facts, and we believe we will win this challenge."

Kotick then appears to address the FTC indirectly, casting his vote of confidence in the merger:

"We believe these arguments will prevail despite a regulatory environment driven by ideology and misconceptions about the tech industry."

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(Image credit: Microsoft)

What's next for Microsoft?

After a vote, the FTC agreed three to one (opens in a new tab) that it would sue Microsoft. However, the lawsuit should not be taken as a sure sign that the deal will stall. While these may result in a general slowdown in proceedings, they are not a done deal.

The FTC's concerns aren't the first, either. Earlier this year, Microsoft faced similar concerns (opens in a new tab) from the UK's Competition and Markets Authority, which said the merger could hurt Sony by retaining key rival console titles. This shows that it's not just the FTC that is wary of Microsoft, as the proposed purchase is under intense scrutiny from international regulators.

As for the FTC case, Microsoft will have an opportunity to defend its position in court. As of this writing, no court date has been disclosed.

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