In a significant setback for Microsoft’s ambitious $75 billion acquisition of Activision Blizzard, a US federal judge has temporarily blocked the deal in response to a request from the Federal Trade Commission (FTC).
The move comes as the FTC pursues a legal challenge against the acquisition, citing concerns about potential anticompetitive practices and a breach of US antitrust laws. The decision by the judge puts a hold on the closure of the gaming industry’s largest-ever deal and sets the stage for an evidentiary hearing next week.
Legal Proceedings and Judge’s Order
On Tuesday, June 13, a US district court judge in California issued an order prohibiting the completion of Microsoft’s acquisition of Activision Blizzard pending an evidentiary hearing scheduled for June 22-23. The FTC, which had previously filed a lawsuit against the deal, requested the court’s intervention to prevent the transaction from closing until the conclusion of its own in-house proceedings, set to begin in August. The judge’s temporary restraining order aims to maintain the status quo and enable the court to consider the FTC’s allegations and determine if a preliminary injunction is warranted.
FTC’s Allegations and Microsoft’s Response
The FTC’s complaint argues that if Microsoft gains control of Activision’s content, it would have the power to manipulate or restrict access to that content, thereby stifling competition in terms of product quality, pricing, and innovation. “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 regulatory body expressed concerns over reports suggesting an imminent closure of the deal, prompting its decision to seek a federal court order. Microsoft, in response, emphasized the need to expedite the legal process, asserting that it would ultimately bring more choice and competition to the gaming market. The company expressed confidence in the court’s decision-making process and its commitment to complying with regulatory requirements.
Impact on the Biden Administration’s Antitrust Policies
The FTC’s challenge against the Microsoft-Activision deal represents a significant merger challenge under the current administration led by President Joe Biden. The administration has adopted a tough stance on anti-competitive practices, appointing progressive officials, including FTC Chair Lina Khan, who prioritize enforcing antitrust laws. This case highlights the administration’s commitment to ensuring fair competition and preventing consolidation that could harm consumers and market competition.
International Perspectives and Regulatory Actions
The UK’s Competition and Markets Authority dealt a severe blow to the deal in April by ordering its blockage. The authority raised concerns that Microsoft might make Activision’s games exclusive to its own cloud gaming service. In contrast, the European Union approved the deal in May after Microsoft made concessions, including allowing European consumers to stream Activision games on all cloud gaming providers for a decade. These diverging regulatory decisions underscore the challenges of navigating antitrust regulations across jurisdictions.
The temporary restraining order imposed by the US federal judge represents a significant obstacle for Microsoft’s acquisition of Activision Blizzard. The hearing next week will determine whether a preliminary injunction will be granted, effectively prolonging the legal battle. The outcome will shape the future of this high-profile deal, with potential repercussions for the gaming industry and the broader landscape of mergers and acquisitions. As the legal process unfolds, the case will continue to test the Biden administration’s commitment to promoting competition and ensuring a level playing field in the tech and gaming sectors.
