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Report: FTC “Likely” to File Lawsuit to Block Microsoft/Activision Merger

Report: FTC "Likely" to File Lawsuit to Block Microsoft/Activision Merger
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Just a few of the Activision franchises that will become Microsoft properties when the acquisition is complete.
Enlarge / Just a few of the Activision franchises that will become Microsoft properties when the acquisition is complete.

Microsoft / Activision

The Federal Trade Commission will “probably” move to file an antitrust lawsuit against Microsoft and Activision Blizzard to block the companies’ planned $69 billion merger deal. That is according to a new Politico report quoting “three [unnamed] people with knowledge of the matter.

While Politico writes that a lawsuit is “not yet guaranteed,” it adds that FTC staff “are skeptical of the companies’ arguments” that the deal won’t be anticompetitive. The sources also confirmed that “much of the heavy lifting is complete” in the commission’s investigation, and that a lawsuit could be filed as early as next month.

Sony, the main opponent of the proposed purchase of Microsoft, hasd discuss publicly than an existing three-year contractual warranty to maintain Activision’s best-selling products obligations The franchise on PlayStation is “inadequate on many levels.” In response, Microsoft Head of Xbox Phil Spencer has publicly promised to continue shipping obligations games on PlayStation “as long as there’s a PlayStation to send to.” However, it is not clear if the companies have registered that offer as a legal agreement; The New York Times reported this week that Microsoft had offered a “10-year agreement to keep obligations on PlayStation”.

Numerous statements by Microsoft executives, including Spencer, have suggested that the company is less interested in bolstering its position in the “console wars” and more interested in boosting its mobile, cloud gamingY game pass subscription offerings beyond obligationsPolitico reports that the FTC is concerned about how Microsoft “might take advantage of future unannounced titles to boost its gaming business.”

Microsoft “stands prepared to address the concerns of regulators, including the FTC, and Sony to ensure the deal closes with confidence,” spokesman David Cuddy told Politico. “We will continue to trail Sony and Tencent in the market after the deal closes, and together Activision and Xbox will benefit gamers and developers and make the industry more competitive.”

There are many speed bumps

Reports of a possible FTC lawsuit add to a growing list of worrisome signs about the proposed purchase from various international governments. Earlier this month, the European Commission said it was move to an “in-depth investigation” of the deal. In the UK, a similar “Phase 2” investigation by the country’s Markets and Competition Authority has scheduled a hearing for next month.

Those international investigations they are expected to finish in March, ensuring that the proposed settlement won’t close before then and giving the FTC some time before it has to file a lawsuit. Any such lawsuit would have to be approved by a majority of the four current FTC commissioners and would likely start in the administrative court of the FTC. And whatever the outcome, legal maneuvering in the case could easily delay the planned merger beyond the contractual deadline of July 2023, by which time both companies would have to renegotiate or abandon the deal.

An FTC lawsuit in this matter would also be the strongest sign yet of a robust antitrust compliance regime under FTC Chairman Lina Kahn, a major tech skeptic who was appointed to the position in June. In July, Kahn announced an antitrust lawsuit against Meta (formerly facebook) proposed the purchase of $400 million from withincreators of the VR fitness app Supernatural.

Three months after the Microsoft purchase proposal was announced in January, a group of four US senators wrote an open letter strongly urging the FTC to take a close look at the deal. Last month, merger news site said FTC staff had raised “significant concerns” about the settlement. And this week, the New York Times quoted “two people” in reporting that the FTC had contacted other companies for affidavits outlining their concerns about the settlement, a possible sign they were preparing for the lawsuit.

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