Xbox Microsoft Activision dEAL

The Federal Trade Commission (FTC) has asked US courts to block Microsoft’s $69 billion acquisition of Activision Blizzard while the government’s case against the deal is heard. 

The FTC has already filed a legal challenge to stop the merger in December, but now it’s seeking a temporary restraining order and an injunction to grind the deal to a halt worldwide.

The watchdog said Microsoft and Activision had signalled the deal could close as soon as Friday regardless of the block on the UK, and asked a federal judge to block any final agreement before 15 June.

European regulators gave the deal the green light last month, so Microsoft could legally close without the UK and without an injunction in the US preventing the deal from closing.

“Press reports began circulating suggesting that defendants were seriously contemplating closing the proposed acquisition despite the pending administrative litigation and the CMA orders,” reads the FTC complaint. 

“Both a temporary restraining order and a preliminary injunction are necessary because Microsoft and Activision have represented that they may consummate the proposed acquisition at any time.”

A US judge will now need to decide if it is necessary to issue a temporary restraining order to restrict Microsoft from closing the deal for two weeks and a preliminary injunction that would prevent block Microsoft from closing until the result of the FTC’s legal complaint. 

A hearing is scheduled for 2nd August, shortly after the start of Microsft’s appeal hearing in the UK. 

An Imminent deal

The FTC wishes to block the Microsft-Activision merger on antitrust grounds, arguing it would give Microsoft’s Xbox exclusive access to Activision games, leaving Nintendo consoles and Sony’s PlayStation at an unlawful disadvantage. 

But Microsoft has said the deal would benefit gamers and gaming companies alike and has offered to sign a legally binding consent decree with the FTC to provide Call of Duty games to rivals including Sony for a decade. 

When the deal was first announced in January 2022, Microsoft said it expected it would close in its 2023 fiscal year, which ends at the end of this month. This has forced the FTC to act fast. 

 “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.” an FTC spokeswoman said. 

‘This Benefits Everyone

If the FTC’S injunction is unsuccessful, Microsoft has said it will be eager to fast-track the FTC case. 

“We welcome the opportunity to present our case in federal court,” Microsoft Vice Chair and President Brad Smith said in a statement. 

“Today’s action by the FTC to file suit in our Activision case in federal court should accelerate the decision-making process. This benefits everyone.”

“We always prefer constructive and amicable paths with governments but have confidence in our case and look forward to presenting it.”

Activision CEO Bobby Kotick shares Smith’s positive outlook on the decision. In an email to employees shared publicly, Kotick said: “This is a welcome update that accelerates the legal process. 

“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.”

But Gareth Mills, Partner at law firm Charles Russell Speechlys, believes the FTC's decision demonstrates that Microsoft and Activision still have a long way to go when it comes to persuading regulators to accept the deal.

The attitude of the UK’s Competition and Markets Authority and the FTC’s stance shows that Microsoft still has some way to go to convince all regulators that competition concerns have been, or could be, addressed in all jurisdictions.

Gareth Mills, Partner at law firm Charles Russell Speechlys

"Microsoft’s response to the CMA’s decision was particularly robust and it will be very interesting to see if they decide to take the same approach with regards to the FTC, or whether a more conciliatory position aimed at agreeing suitable post-takeover remedies will be preferred,” Mills added.