The Federal Trade Commission (FTC) is suing to block Microsoft’s acquisition of gaming giant Activision

Suspension

The Federal Trade Commission on Thursday sued to block Microsoft’s $69 billion acquisition of video game publisher Activision Blizzard, charging that the mega deal would allow the Washington tech giant to crack down on its gaming competitors.

The lawsuit represents the FTC’s most significant effort to rein in consolidation in the tech industry since prominent technology critic Lena Khan (D) became chair of the committee and was expected to usher in a new era of antitrust enforcement characterized by a willingness to file cases in court rather than pursue settlements with companies.

The case points to a broader strategy at the agency to sue deals that may pose competitive threats in the future, particularly in emerging gaming markets. The lawsuit was issued the same day that the trial began in San Jose, California, in a Federal Trade Commission lawsuit against Facebook parent company Meta over its acquisition of the virtual reality company Within. The agency argued that if the companies could be kept separate, they would push each other to develop more features and attract more users, benefiting competition in the future.

An FTC lawsuit against Microsoft could thwart the company’s ambitions to become a bigger hitter in the gaming frontier. Activision is the owner of massively popular titles like “Candy Crush” and “Call of Duty,” and its acquisition could boost Microsoft in its competition with Japanese game console makers Nintendo and Sony.

On Thursday, the commission took a bipartisan vote to bring the lawsuit to administrative court, with the three Democrats in favor of the complaint and one Republican against it.

Microsoft had not seen such a serious regulatory threat to its business in more than two decades, when the Justice Department filed an antitrust lawsuit against the company that had ensnared it in years of legal battles.

After the case was settled in 2002, Microsoft largely avoided the antitrust glare focused on tech competitors including Facebook, Google, Apple and Amazon — even the proposed acquisition of Activision, the largest deal in Microsoft history. (Amazon founder Jeff Bezos owns The Washington Post.)

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Microsoft President Brad Smith indicated that the company would fight the lawsuit, saying in a statement that the company was “committed from day one to addressing competition concerns.”

“While we believed in giving peace a chance,” Smith said, “we have full confidence in our cause and welcome the opportunity to present our case in court.”

Since announcing its intention to buy Activision in January, Microsoft has announced a series of policies and arrangements intended to show regulators that the deal won’t give it an unfair advantage in the gaming market or harm workers. On Tuesday, just as the agency was apparently about to decide whether or not to block the deal, Microsoft announced that it would be bringing the Call of Duty franchise to Nintendo Switch, Xbox’s competitor. It had previously said that it would make Call of Duty available on Sony’s Playstation.

The FTC moved to block the deal a day after Microsoft employees met with agency representatives to discuss the lawsuit, according to a person familiar with the meeting, who spoke on condition of anonymity to discuss a private meeting. Smith said the company offered “proposed concessions” to the agency earlier this week.

Activision currently makes its popular games available to 154 million monthly active users worldwide on a variety of video game consoles, computers, phones and tablets, according to an FTC news release about the complaint. But the FTC claims that if the deal closes, that could change. Microsoft would have the ability to frustrate competitors by withholding these games from competing gaming systems altogether, or by gouging the prices and degrading quality of games on competing consoles.

The lawsuit warns that the deal not only gives Microsoft the upper hand in consoles, but also gives an unfair advantage in emerging games, such as subscription and cloud games, according to an FTC official, who spoke on condition of anonymity to discuss the matter. agency argument. The FTC argues that this deal could discourage innovation in emerging gaming markets, the person said.

Microsoft’s Xbox gaming business brought in $3.6 billion in the quarter ending in September. Xbox consoles trail behind both Japanese rivals Sony and Nintendo in sales, the company told the UK antitrust regulator in October. Microsoft has a record of acquiring gaming content and then using it to crush competition from rival console makers, according to the Federal Trade Commission. Citing Microsoft’s acquisition of game developer Zenimax, the agency says the company’s subsidiary has made titles including Starfield and Redfall exclusive to Microsoft hardware despite previous assurances from European regulators.

“Microsoft has already shown that it can and will withhold content from its gaming competitors,” Holly Vidova, director of the Federal Trade Commission’s Office of Competition, said in a press release. “Today we seek to prevent Microsoft from taking control of a leading independent game studio and using it to harm competition in dynamic and fast-growing game markets.”

The European Union announced last month that it had opened an investigation into the deal, warning that Microsoft “may block access” to Activision’s games.

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