FTC Urges US Appeals Court to Block Microsoft’s Activision Merger

The Federal Trade Commission (FTC) has called on a federal appeals court to intervene and block Microsoft’s recent $69 billion acquisition of video game publisher Activision Blizzard. The FTC argues that District Judge Jacqueline Scott Corley, who allowed the deal to proceed in July, was too lenient in accepting Microsoft’s promises about the future of the popular first-person shooter game, “Call of Duty.”

The antitrust regulator contends that Judge Corley went too far in relying on 11th-hour contracts Microsoft signed with gaming companies, including Nintendo and Nvidia, regarding “Call of Duty” to address anti-competitive concerns related to the merger. The FTC’s stance remains a lone effort to thwart the merger, which has already gained approval from the European Union and the United Kingdom and officially closed in October.

The FTC’s argument, presented before a three-judge panel of the Ninth Circuit US Court of Appeals, centres on concerns that Microsoft’s control over Activision titles, including “Call of Duty” and “World of Warcraft,” could lead to restrictions on these titles for rival console makers or cloud streaming platforms. The regulator has previously sued twice to block the merger but faced setbacks in both its in-house administrative court and US district court.

Microsoft has sought to address these concerns by entering multi-year agreements with rival gaming platforms, ensuring continued access to “Call of Duty.” The deals also allowed the game to appear on rival cloud streaming services, such as Nvidia’s. In negotiations with UK antitrust officials, Microsoft further addressed concerns by spinning off Activision’s cloud gaming rights to Ubisoft.

During the appeals court hearing, the FTC argued that even with these agreements, Microsoft would gain a monopoly over Activision’s content in certain domains, including the market for video game subscription services. The FTC contends that despite potential benefits for some gamers, granting Microsoft a monopoly is not pro-competitive and could have broader antitrust implications.

Microsoft’s legal representative, Rakesh Kilaru, countered by asserting that Judge Corley’s July ruling made clear factual findings that the merger would be beneficial for consumers. Kilaru argued that providing consumers with something new and beneficial is not a violation of antitrust laws unless evidence is presented to the contrary. The FTC countered by highlighting the changing economic landscape due to Microsoft’s evolving licensing agreements, which the regulator claims it did not have a full opportunity to review before the case concluded.