FTC files to block Microsoft-Activision Blizzard deal

The Federal Trade Commission on Monday applied for a temporary restraining order and preliminary injunction seeking to block Microsoft’s acquisition of Activision Blizzard before the deal’s July 18 deadline.

CNBC reported on the FTC’s plans earlier in the day.

“A preliminary injunction is necessary to maintain the status quo and prevent interim harm to competition during the pendency of the FTC’s administrative proceeding to determine whether the Proposed Acquisition violates U.S. antitrust law,” the FTC said in a filing. “A temporary restraining order is necessary to maintain the status quo while this Court decides whether to grant the requested preliminary injunction.”

Microsoft announced its intent to buy Activision Blizzard for $68.7 billion in January 2022 in what would be its largest transaction to date. At the time, the software maker said it expected to complete the deal by the end of June 2023. If the deal falls apart, Microsoft might wind up owing Activision Blizzard a termination fee worth up to $3 billion.

“We welcome the opportunity to present our case in federal court,” Microsoft President Brad Smith said. “We believe accelerating the legal process in the U.S will ultimately bring more choice and competition to the market.”

For months Microsoft has dealt with regulatory opposition to the deal, specifically from the United Kingdom’s Competition and Markets Authority and the U.S. Federal Trade Commission. A hearing on the FTC’s case will begin on Aug. 2, the agency said in Monday’s filing.

“Fact discovery in the administrative proceeding has closed, expert reports have been served, and final witness lists and exhibit lists have been exchanged,” the FTC wrote in its request. “The parties have scheduled expert depositions through the end of June, and motions in limine and pretrial briefs are due in July. The administrative hearing will assess the legality of the Proposed Acquisition and will provide all parties a full opportunity to present testimony and other evidence regarding its likely competitive effects.”

Brad Smith, Microsoft’s president and vice chair, was scheduled to meet last week with UK Chancellor Jeremy Hunt regarding the deal, Bloomberg reported, citing unnamed people.

In May the European Union’s executive arm approved the deal after initially saying it was worried the deal would reduce competition. Regulators had originally felt that Microsoft might be able to prevent other companies from distributing Activision Blizzard games such as Call of Duty titles on other consoles other than Microsoft’s Xbox.

Microsoft offered its main rival in consoles, Sony, a decade-long contract to make every Call of Duty game available on Sony PlayStation at the same time the Xbox gets it. But Sony has not accepted.

“I don’t want a new Call of Duty deal. I just want to block your merger,” Jim Ryan, Sony Interactive Entertainment’s president and CEO, has said, according to a tweet from Lulu Cheng Meservey, an Activision Blizzard executive.

But unlike Sony, the European Union regulators have come around.

“Even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the consoles market,” they said last month.

The European Union also at first had feared that Microsoft might prevent other companies from offering Activision Blizzard games through cloud-based streaming services that compete with Microsoft’s Game Pass. But as part of its decision to approve the deal, they said Microsoft would offer free 10-year licenses to cloud-based streaming services that would enable people in the European Economic Area to stream Activision Blizzard PC and console games.

This story is developing. Please check back for updates.

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