Microsoft’s Activision Blizzard Deal ‘Likely’ Faces A Lawsuit From The Feds To Try And Block It

Well, here’s a pre-Thanksgiving stunner. According to Politico, the Federal Trade Commission is “likely” to try and block Microsoft’s attempt to buy Activision Blizzard for $68.7 billion. The agency could file an antitrust lawsuit as soon as next month. If the FTC takes such a step, that would be a major roadblock for the deal.

MORE FROM FORBESThe FTC Will Reportedly Review The Microsoft-Activision Blizzard Deal

The report states that the FTC’s four commissioners haven’t yet voted on whether to file a lawsuit. The agency has not yet met with Microsoft or Activision Blizzard lawyers about the possibility either. However, Politico states that FTC staff members have called some of the claims made by Microsoft and Activision into question.

The FTC is said to mainly be concerned about whether the merger would give Microsoft an unfair advantage in the video game industry. As things stand, Xbox is the third-biggest player in the gaming market behind PlayStation and Tencent.

Microsoft and Activision have tried to downplay the significance of the deal (which, again, is worth $68.7 billion). Sony has claimed that if Microsoft keeps games like Call of Duty away from PlayStation, Sony would face a major disadvantage.

Sony stands to lose hundreds of millions of dollars a year if Microsoft were to yank Call of Duty from PlayStation. However, Microsoft said that it offered Sony a deal earlier this month to keep Call of Duty on PlayStation for 10 years.

Microsoft has also said that the Activision deal is more about helping it to become a player in mobile gaming (through the likes of Candy Crush Saga) than to improve its PC or console offerings. It wants to put Activision Blizzard titles on Game Pass all the same.

Microsoft and Sony have been slinging mud at each other in regulatory filings in several countries over the last few months. They’ve both cherry picked facts to back up their arguments. For instance, Microsoft claims that Call of Duty isn’t a must-have game for Sony and that putting it on Game Pass wouldn’t hurt PlayStation.

Activision has disputed claims that the deal would negatively impact competition as well. “Any suggestion that the transaction could lead to anticomp effects is completely absurd,” Activision spokesperson Joe Christinat told Politico. “This merger will benefit gamers and the US gaming industry, especially as we face increasingly stiff competition from abroad.”

Last month, one of the FTC’s Republican members stepped down, meaning the agency has three Democratic commissioners and one Republican as things stand. Noah Phillips, who left his post as commissioner, had opposed many of FTC chair Lina Khan’s attempts to rein in the tech industry’s power. For instance, he voted against a lawsuit that seeks to block Meta’s purchase of a VR startup called Within Unlimited. In other words, if Khan wants to pursue an antitrust lawsuit against the Microsoft-Activision Blizzard deal, she’ll now likely face less resistance from other commissioners.

Politico says that the FTC is most of the way through its antitrust investigation, which may have started all the way back in February. The agency has reportedly already heard testimony from Microsoft CEO Satya Nadella and Activision counterpart Bobby Kotick.

FTC regulators have other concerns about the Microsoft-Activision deal beyond Call of Duty. “Investigators are trying to determine how Microsoft could leverage future, unannounced titles to boost its gaming business,” Politico said. Regulators in the UK and the EU are also examining the takeover closely, meaning that it’ll be at least spring before Microsoft and Activision can close the deal, if at all.

I’ve been saying ever since it was announced that the planned merger is far from a done deal, but any FTC lawsuit could be a death blow. Politico notes that if the FTC files an antitrust lawsuit by the end of the year or in January, it would unlikely be resolved before July — which after the deadline Microsoft and Activision have set for closing the deal. Were that to be the case, the companies would have to renegotiate their agreement or, failing that, walk away from the merger.

Again, there is no guarantee that the FTC will try to block the merger. Boots Politico’s reporting is usually solid and there’s no smoke without fire. We’ll need to wait and see how things shake out in the coming weeks and months.

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