The US Federal Trade Commission (FTC) filed a preliminary injunction Thursday to block Microsoft's purchase of Activision Blizzard. The action tries to stop the sale from completing before an administrative court hears the government's argument against it.
James Weingarten, an attorney with the FTC, highlighted worries about the merger's possible effects on competition in several industries relating to gaming consoles, subscription services, and cloud gaming during the opening arguments of the five-day evidentiary hearing, per Reuters.
Microsoft-Activision Blizzard Merger Endangers Industry
According to the FTC, the business would have the capacity and motivation to hurt the competition if the merger occurred.
The commission requested a judge halt the $69 billion merger between Microsoft and Activision Blizzard until its internal court can decide whether the combination will hurt competition in the gaming industry.
The purchase would give Microsoft's Xbox platform exclusive access to Activision titles, thus excluding Nintendo and Sony's PlayStation, one of the key concerns voiced by the FTC. Beth Wilkinson, a Microsoft lawyer, said it is in Xbox's best interest to make Activision games accessible to as many players as possible across various platforms.
Key witnesses, including Matt Booty, head of Xbox Game Studios at Microsoft, Sarah Bond, corporate vice president of the gaming ecosystem, and Pete Hines, group senior vice president and director of publishing at Microsoft subsidiary Bethesda Softworks, gave opening statements before the evidentiary hearing began.
Microsoft and Activision Blizzard need the US litigation to be resolved to complete the merger since they have run into antitrust issues in many nations. While the British competition authorities denied Microsoft's acquisition of Activision in April, the European Union authorized the deal in May.
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Microsoft Faces Pressure
In a joint statement, Microsoft and Activision argued that the agreed-upon purchase price was based on the desire to increase rather than limit the availability of games. They said that preventing the release of specific titles would hardly affect Sony's hegemonic dominance in the console gaming industry. Sony allegedly rejected Microsoft's 10-year Activision game licensing deal to prevent the purchase.
Microsoft is under pressure to finalize the purchase before the FTC's administrative law case starts since the acquisition deadline is slated to expire on July 18.
A $3 billion break-up charge would be assessed if the agreement was not finalized, as per a report from the Financial Times. According to Microsoft and Activision, a preliminary injunction would undoubtedly ruin the deal.
While Microsoft's promise to license Activision titles to rival cloud gaming platforms allayed the regulatory worries of the European Union, the resistance from US and UK regulators continues.
The result of this high-stakes legal dispute is quite interesting, especially given that FTC Chair Lina Khan is involved. Khan supports litigation in challenging cases and uses cutting-edge legal theories to modernize antitrust law, CNN reported.
When the FTC forced Nvidia to give up its intended purchase of chipmaker Arm last year, an unusual event for a vertical merger in the United States, Khan won a significant victory.
