On Monday, in its second lawsuit in the Microsoft Activision Blizzard acquisition, the Federal Trade Commission filed a request for a temporary restraining order and preliminary injunction to stop the $68.7 billion deal before the July 18 deadline, reports CNBC. In December, the FTC made its first attempt to block the deal by filing an administrative complaint. A hearing on that complaint is set for August. If Microsoft loses that hearing, they could appeal to a federal court.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition, in a December 8, 2022 news release. “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.”

If the deal goes through, this would be the largest acquisition in video game history, according to Forbes. Currently, video game developer Activision makes its games, including Call of Duty, World of Warcraft, Diablo and Overwatch, available on video game consoles, PCs and mobile devices. The FTC’s concern is that if the acquisition proceeds Microsoft has the “means and motive to harm competition” by controlling pricing, game quality, game distribution and other factors to favor its own systems and services. The FTC hopes that a temporary restraining order and preliminary injunction will put the deal on hold while the complaint works its way through the administrative review process.

UK rejects Activision Blizzard deal, EU gives green light

Meanwhile, across the pond, the UK Competition and Markets Authority rejected Microsoft’s deal to acquire Activision Blizzard as anticompetitive. The CMA began an in-depth review of the deal last September. In February, the CMA made an initial ruling against the acquisition but said they were willing to listen to possible solutions to address antitrust concerns. Microsoft countered with a list of possible remedies, but in April, the CMA said the proposed solutions did not sufficiently address their concerns that the merger would stifle competition in the cloud gaming market.

“The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future,” the CMA wrote.

“Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities,” added the CMA.

The deadline to appeal CMA’s decision comes after the July 18 deadline, says CNBC.

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Weeks later, the European Commission approved the acquisition following a preliminary investigation and an extensive market investigation. The Commission did not feel that Microsoft would harm rival consoles or cloud gaming services with the purchase of Activision Blizzard..

“Video games attract billions of users all over the world. In such a fast-growing and dynamic industry, it is crucial to protect competition and innovation. Our decision represents an important step in this direction, by bringing Activision’s popular games to many more devices and consumers than before, thanks to cloud game streaming. The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, enhancing competition and opportunities for growth,” Vestager said in a May 15 news release.

Insider Take

For now, the deal is at a standstill so the next month will be critical in the case. While the CMA’s rejection of the acquisition somewhat bolsters the FTC’s position, the Commission’s approval of the deal does not. Microsoft is willing to compromise on the Activision Blizzard acquisition and has provided assurances that the acquisition will not harm competition in the cloud gaming market, but the FTC is taking a hard line on what it deems to be anticompetitive behavior these days. Who will prevail?

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