Federal Trade Commission Officially Opposes Microsoft’s Activision Blizzard Buyout

Key insights

6 takeaways

01
The U.S. Federal Trade Commission (FTC) officially filed a lawsuit on December 8, 2022, to block Microsoft’s proposed $69 billion acquisition of Activision Blizzard.
02
The FTC alleges the merger would harm consumers and stifle competition by allowing Microsoft to leverage AAA titles like Call of Duty and World of Warcraft to force users toward its own console and cloud gaming platforms.
03
The decision to file the lawsuit followed a 3-1 vote by FTC commissioners.
04
Microsoft has prepared to contest the lawsuit in court, citing existing efforts to maintain market access, including 10-year agreements to keep Call of Duty on Nintendo and Sony PlayStation platforms.
05
If the acquisition fails to close, Microsoft is contractually obligated to pay Activision Blizzard a $3 billion termination fee.
06
While the FTC is the first major global regulatory body to formally oppose the deal, other regulators in the UK and European Union have also expressed significant concerns regarding the acquisition.

Summary

The Federal Trade Commission (FTC) formally initiated legal action in December 2022 to block Microsoft’s proposed $69 billion acquisition of Activision Blizzard. The agency’s primary thesis is that the merger would harm consumers and stifle competition within the gaming industry. Specifically, regulators expressed concern that Microsoft could leverage high-profile intellectual property, such as the Call of Duty and World of Warcraft franchises, to incentivize users to migrate from rival platforms to its own console and cloud gaming ecosystems.

The decision to file the lawsuit followed a 3-1 vote by the commission, marking the first instance of a major global regulatory body officially opposing the transaction. The legal challenge sets the stage for a significant antitrust battle, as Microsoft has signaled its intent to contest the agency's claims in federal court. As part of its defense strategy, Microsoft has proactively sought to mitigate competition concerns by securing 10-year agreements to maintain Call of Duty availability on platforms such as Nintendo’s consoles and PlayStation.

The scope of this regulatory intervention is focused on the United States, though it occurs alongside broader international scrutiny from authorities in the United Kingdom and the European Union. Should the acquisition fail due to these regulatory hurdles, the terms of the agreement stipulate that Microsoft would be required to pay a $3 billion termination fee to Activision Blizzard. The case highlights the ongoing tension between major technology firms seeking to expand their gaming portfolios and government regulators tasked with maintaining market competition.