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February 21, 2024

The U.S. Federal Trade Commission sued Microsoft on Monday to block the company’s $69 billion takeover of video game giant Activision Blizzard, escalating federal efforts to block the largest consumer technology deal in decades.

exist litigation, the FTC said in a filing in the U.S. District Court for the Northern District of California that the move was necessary because “Microsoft and Activision have indicated that they may complete” the deal.It asked the court to issue an order preventing the acquisition from being completed by the end of the day Thursday.

The lawsuit is the latest blow to Microsoft’s acquisition of Activision, maker of popular video games such as Call of Duty and Candy Crush. Last year, the FTC sued in internal court to block the deal, arguing it would hurt competition in various segments of the video game market. The agency filed a separate lawsuit because, unlike the FTC’s internal courts, federal courts can issue restraining orders to prevent purchases from being completed.

A mountain of regulatory hurdles has stymied the blockbuster deal, which has become a test of whether Big Tech can pull off a major acquisition amid a backlash against the company’s growing power. Britain’s Competition and Markets Authority also moved to block the deal in April, although EU regulators said in May it could go ahead.

Governments around the world have been challenging the power of tech giants like Microsoft. The FTC has accused Facebook parent Meta of shutting down emerging rivals and has been investigating whether Amazon violated antitrust laws. The Justice Department has filed multiple lawsuits alleging that Google itself violated antitrust laws.

Microsoft has appealed the U.K. ruling blocking the Activision deal and has pledged to fight the FTC in court. The companies have said they hope to close the acquisition by July.

The UK portion of the deal cannot be completed while Microsoft’s appeal moves forward. If a federal court grants the FTC’s request to stop the deal, it would also prevent Microsoft from completing the deal in the United States.

Bill Bell, a former senior government antitrust official, said the FTC lawsuit was a response to the risk that Microsoft was trying to circumvent the U.K. ruling and “do harm to the FTC”. Worry” by closing the deal elsewhere.

FTC spokeswoman Victoria Graham (Victoria Graham) said in a statement that “Microsoft and Activision did not provide assurances” that they would not complete the deal.

Microsoft President Brad Smith said in a statement that the company welcomes “the opportunity to present our case in federal court.”

In a note to employees, Activision CEO Bobby Kotick said the company welcomed the news because it “expedites the legal process.” “We will now have the opportunity to show the facts of our merger more quickly,” he added.

If Microsoft pushes through the deal, it would be a landmark moment for the $184 billion gaming industry. Microsoft makes billions of dollars a year in the video game business, but rivals such as Nintendo and Sony, which makes the PlayStation console, have long been considered to have better catalogs of games to entice gamers to their devices. Adding Activision and its string of game studios to Microsoft’s Xbox console and its game subscription service could even level the playing field.

FTC Chairman Lina Khan has made blocking corporate deals a cornerstone of her strategy to rein in tech giants and other big companies. Chipmaker Nvidia and defense contractor Lockheed Martin dropped the proposed deal after being challenged by the FTC under Khan.

Attempts to block other transactions were less successful. Last year, the FTC tried to block Meta’s acquisition of Within, a startup that makes virtual reality fitness games. A federal judge declined to block the deal from closing, and the Federal Trade Commission dropped a broader challenge to the acquisition.

Microsoft has struggled to gain regulatory approval for the Activision acquisition. Since announcing the deal a year and a half ago, the company has gone on a charm offensive, meeting with regulators around the world and striking deals with other gaming companies to ease concerns that the deal would reduce the availability of Activision’s games and concerns about raising its price.

But those moves failed to convince British and U.S. regulators to approve the deal. Analysts say the new FTC lawsuit could be an attempt by the United States to regain some prominence in the legal battle and an acknowledgment that Microsoft can get the deal done despite Britain’s objections.

“The FTC reiterated how determined it was to block this deal,” said Joost van Dreunen, a games analyst and professor at New York University. “They want to make sure they’re still driving the bus.”



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