Microsoft, the maker of Xbox gaming consoles and one of the largest technology companies in the world, announced in January 2022 that it would acquire Activision Blizzard, the developer and publisher of some of the most popular video games in the industry, such as Call of Duty, World of Warcraft, and Overwatch. The deal, valued at $69 billion, would be Microsoft’s largest ever and the largest ever in the video gaming industry.
However, the deal has faced significant opposition from regulators and competitors, who fear that Microsoft would use its control over Activision Blizzard’s blockbuster franchises to harm competition in multiple gaming markets, including high-performance gaming consoles, subscription content services, and cloud-based gaming. In December 2022, the Federal Trade Commission (FTC) sued to block the deal, alleging that it would enable Microsoft to suppress competitors by denying or degrading their access to Activision Blizzard’s games.
On June 12, 2023, the FTC escalated its legal challenge by filing a temporary restraining order and preliminary injunction with a federal court in San Francisco, seeking to stop Microsoft from completing the deal before its July 18 deadline. The FTC argued that the injunction was necessary because if the parties were allowed to merge before the case made its way through an administrative proceeding, “reestablishing the status quo would be difficult, if not impossible.”
The FTC’s complaint pointed to Microsoft’s record of acquiring and using valuable gaming content to suppress competition from rival consoles, such as its acquisition of ZeniMax, parent company of Bethesda Softworks (a well-known game developer). Microsoft decided to make several of Bethesda’s titles including Starfield and Redfall Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles.
“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. “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.”
Microsoft defended its deal and welcomed the opportunity to present its case in federal court. “We believe accelerating the legal process in the U.S will ultimately bring more choice and competition to the market,” said Brad Smith, Microsoft’s president and vice chair.
A hearing on the FTC’s case will begin on Aug. 2. The administrative hearing will assess the legality of the proposed acquisition and will provide all parties a full opportunity to present testimony and other evidence regarding its likely competitive effects.
