FTC sues to block Microsoft-Activision Blizzard $69B merger

The Federal Trade Commission on Thursday sued to block Microsoft’s planned $69 billion takeover of video game company Activision Blizzard, saying it could suppress competitors to Microsoft’s Xbox game console and its growing games subscription business.

The FTC’s challenge could be a test case for President Joe Biden’s mandate to scrutinize big tech mergers. The commission voted 3-1 to issue the complaint after a closed-door meeting, with the three Democratic commissioners voting in favor and the sole Republican voting against.

The complaint points to Microsoft’s previous game acquisitions, especially of well-known developer Bethesda Softworks and its parent company ZeniMax, as an example of where Microsoft is making some upcoming game titles exclusive to Xbox despite assuring European regulators it had no intention to do so.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said a prepared statement from Holly Vedova, director of the FTC’s Bureau of Competition. “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.”

The FTC said it was filing the complaint through its administrative process rather than taking the case to a federal court. An administrative law judge it set to hear evidence but not until August 2023, according to the complaint.

Microsoft’s president, Brad Smith, signaled in a statement Thursday that the company is likely to challenge the FTC’s action.

“While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court,” Smith said.

The company had been ramping up its public defense of the deal in recent days as it awaited a decision. Smith said Microsoft has been committed to addressing competition concerns and brought proposed concessions to the FTC earlier this week.

“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Smith said.

Microsoft announced the merger deal in January but has faced months of resistance from Sony, which makes the competing PlayStation console and has raised concerns with antitrust watchdogs around the world about losing access to popular Activision Blizzard game franchises such as the military shooter game Call of Duty.

Antitrust regulators under Biden “have staked out the view that for decades merger policy has been too weak and they’ve said, repeatedly, ‘We’re changing that,’” said William Kovacic, a former chair of the FTC.

That has put pressure on the FTC to fulfill its bold promises to “not allow dodgy deals and not accept weak settlements,” said Kovacic, who was a Republican commissioner appointed in 2006 by then-President George W. Bush. But he said Microsoft has a good chance of winning its legal challenge.

“It’s evident that the company has been making a number of concessions,” he said. “Microsoft would likely raise them in court and say the FTC is being incorrigibly stubborn about this.”

Microsoft announced its latest promise…