FTC Sues to Block Microsoft Activision Acquisition

The Federal Trade Commission (FTC) sued to block Microsoft $69 billion takeover of Activision Blizzard, which would be the biggest acquisition in the video game industry.

The FTC voted 3-1 on Thursday to sue, claiming that the Xbox maker would have the “means and motive” to harm the competition by changing prices or degrading the quality of Activision’s (ATVI) top games, which include Call of Duty, World of Warcraft, and Overwatch. The FTC warned that Microsoft (MSFT) could withhold content from other systems altogether.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”

The vote was one of the strongest actions taken by federal regulators in decades to rein in the power of large tech companies, a main focus of the commission under the Biden administration. 

The FTC cited Microsoft’s 2021 acquisition of Zenimax Media Inc., the parent company of game developer Bethesda Softworks, as proof of the company's record for suppressing content from the competition. Microsoft made multiple Bethesda titles Microsoft exclusives after ensuring European antitrust authorities that it would not do so.

Activision Blizzard currently has more than 400 million monthly active users (MAU) across various gaming platforms, regardless of the platform’s producer. Microsoft's Xbox is one of only two types of high-performance game consoles, and the FTC stated that Microsoft would be motivated to take Activision’s games off of the other one, the Playstation.

Microsoft also has the leading game content subscription service, Xbox Game Pass, which had 25 million subscribers at the beginning of this year. The FTC worried that it could make Activision games exclusive to Game Pass to boost subscriber numbers, something the company hinted at when announcing its acquisition of the video game producer.

Microsoft’s net income this past quarter was down 14% at $17.6 billion when compared to the same quarter the year prior. Its stock is down 26% over the last 12 months, performing better than the 30% drop in the Nasdaq Composite.