Feds Move To Block $69 Billion Microsoft-Activision Merger

Federal regulators have filed a legal motion to prevent Microsoft from completing its $69 billion deal for Activision Blizzard.

The Federal Trade Commission on Monday filed for a temporary restraining order and an injunction in the Northern District of California to stop the deal from closing.

The FTC sued in December to stop the merger, which would be the largest deal in Microsoft's history as well as the largest video game deal ever, according to regulators. However, the lawsuit — the first hearing in which is scheduled for August 2, according to court filings — doesn't prevent a deal from closing in the meantime, the Associated Press reports.

Microsoft, maker of the Xbox game system, has previously indicated that the deal would close by July 18, despite U.S. regulators' ongoing review and a recent rejection of the merger from UK regulators.

"Microsoft and Activision Blizzard have represented in the past that they cannot close their deal due to antitrust reviews of the transaction in other jurisdictions. But Microsoft and Activision have not provided assurances that they will maintain that position," an FTC spokesperson said in a statement to CBS MoneyWatch. "In light of that, and public reporting that Microsoft and Activision Blizzard are considering closing their deal imminently, we have filed a request for a temporary restraining order to prevent them from closing while review continues."

Microsoft and Activision undeterred

"We welcome the opportunity to present our case in federal court," Microsoft president Brad Smith said in a statement. "We believe accelerating the legal process in the U.S. will ultimately bring more choice and competition to the market."

Activision CEO Bobby Kotick, echoed Smith's statement, calling the FTC's suit "unsupportable." 

"Our excellent legal team has been preparing for this move for more than a year, and we're ready to present our case to a federal judge who can evaluate the transaction on the merits," Kotick said in a statement to employees posted on Activision's blog.

The FTC contends that the all-cash deal, which Microsoft announced in 2022, would give Microsoft and its Xbox console control of Activision's hit franchises, including "Call of Duty," "Overwatch" and "Diablo."

"With control of Activision's content, Microsoft would have the ability and increased incentive to withhold or degrade Activision's content in ways that substantially lessen competition," the FTC said in its Monday filing. "This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry."

Rival Sony, which makes the PlayStation console, has fiercely opposed the merger. 

Microsoft has tried to assuage both competitors and regulators by striking a deal with Nintendo, another competitor, to license Activision titles for 10 years and offering the same deal to Sony if the Activision deal went ahead.

European Union regulators last month approved the deal with some conditions, as have China, Japan, Brazil and South Korea. But the U.K.'s Competition and Markets Authority in April rejected the deal.

Microsoft in late May filed an appeal of the U.K.'s decision and has also voiced strong public opposition directed at top government officials, according to the AP.

In the U.S., a group of video gamers also sued to block the merger last year. The group is appealing an earlier dismissal of the case.

U.S.-based consumer advocacy group Public Citizen, which opposes the deal, welcomed the FTC's move Monday.

"Although the agency has already used its authority to block the merger through administrative proceedings, Microsoft is pushing to culminate the purchase of Activision before the agency can finish its process," Public Citizen's competition policy advocate, Matt Kent, said in a statement. "By filing in federal court to enjoin the transaction, the FTC is showing that it won't back down in the face of Microsoft's escalatory tactics."

With reporting by the Associated Press.