In the suit, the FTC is seeking a permanent injunction and temporary restraining order that would prevent the Xbox maker from completing its deal to buy Activision Blizzard until the commission wraps up its own lawsuit against the move.
The FTC filed its original lawsuit objecting to the $69 billion Activision Blizzard acquisition in December 2022, saying it would, "enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business."
But Microsoft would still be able to complete the acquisition while it battles the FTC in the commission's court. Filing the federal lawsuit would stop Microsoft from being able to finalize the deal until the FTC's own suit wraps up.
"If consummated, the proposed acquisition would be the largest in the history of the video game industry and the largest in Microsoft’s history," the suit states.
"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—including competition on product quality, price, and innovation. This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry."
In a statement Microsoft VP Brad Smith said the company welcomes the opportunity to present its case in a federal court.
"We believe accelerating the legal process in the US will ultimately bring more choice and competition to the market," he added.
In a letter to employees, Activision Blizzard CEO Bobby Kotick said the FTC's suit will allow the company to present the facts about the case more quickly.
"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. "The facts are on our side, and we will continue to keep you updated throughout the process."
It's not just the US that's seeking to block the merger. The UK's Competition and Markets Authority has also objected to the acquisition on fears that it would give Microsoft too much power in the gaming space. The company is appealing that decision.
Acquiring Activision Blizzard would be a massive boon for Microsoft's gaming business. The video game giant counts the incredibly popular “Call of Duty” as one of its marquee franchises, which would drive billions in revenue toward Microsoft’s Xbox division. Last year’s “Call of Duty: Modern Warfare II” brought in $1 billion in its first 10 days on the market.
But it’s not just about “Call of Duty.” The deal would also give Microsoft the ability to offer Activision Blizzard’s various franchises via its Xbox Game Pass, a subscription service that allows gamers to download hundreds of games each month.
Game Pass’s top tier includes Microsoft’s cloud gaming service, which allows you to play games on your console as well as stream them to devices ranging from smartphones to smart TVs for $15 per month.
Cloud gaming is still in its early stages — Microsoft refers to the platform as a beta — but the company is angling for it to become the de facto means for users to play in the future. Building up Game Pass, then, would give Microsoft first-mover advantage in the market.
The company is already beating Sony (SONY) and Nvidia (NVDA) in the cloud market, with the UK’s Competition and Markets Authority estimating that Microsoft controls 60% to 70% of the cloud gaming market share. Adding Activision Blizzard to the pool would make it even more of a dominant force.
Then there’s Activision Blizzard’s King mobile gaming line, which includes “Candy Crush Saga.” Adding that would ensure that Microsoft has a foothold in one of the fastest-growing gaming spaces.
Microsoft still has a chance to overcome the FTC's lawsuit, but the commission isn't looking to make it easier on the software giant.
Microsoft isn't the only big tech company under pressure from regulators. European Union regulators reportedly plan to target Alphabet’s lucrative ad tech business. On Monday, Bloomberg said the regulator is expected to file an antitrust complaint against Google disputing the legality of the business unit, which in 2022 drove approximately 80% of the company’s total revenue.
Last year the company’s ad sales accounted for about $225 billion of the $278.6 billion market where Google controls most of the technology to buy, sell, and serve advertisements online. In 2021, Google’s annual revenues in this space, $209.5 billion.