FTC argues why Microsoft’s deal to buy Activision should be blocked

The U.S. Federal Trade Commission presented its case on Thursday as to why a preliminary injunction should be issued to temporarily block Microsoft’s acquisition of video game maker Activision Blizzard.

The FTC says a judge needs to block Microsoft and Activision Blizzard from closing their $69 billion merger until the agency’s in-house court gets to rule on whether the combination hurts competition in the video game industry.

The companies announced the deal 17 months ago.

“If this deal is completed, the combined company … is likely to have the ability, an incentive, to harm competition in various markets related to consoles, subscription services and the cloud (for gaming),” FTC lawyer James Weingarten said in the government’s opening arguments.

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The combination would give Microsoft’s Xbox video game console exclusive access to Activision games, leaving Nintendo consoles and Sony Group Corp’s PlayStation out in the cold, according to the FTC.

The Activision acquisition would give Microsoft ownership of popular video game titles such as Call of Duty, World of Warcraft and Candy Crush.

Microsoft lawyer Beth Wilkinson responded in opening statements, “I think you will see that every piece of evidence shows that it only makes sense for Xbox to make these Activision games available to as many people on as many platforms as possible.” 

If an injunction is granted it could result in a three-year administrative proceeding that would kill the deal, she added.

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A slew of experts and CEOs are slated to appear Friday, including Microsoft Gaming CEO Phil Spencer, senior Microsoft finance director Jamie Lawver and former director of product management for Google’s now shuttered Stadia cloud gaming service Dov Zimring. Sony Interactive Entertainment CEO Jim Ryan will appear by video deposition.

The FTC has argued that the deal, which would be the largest for Microsoft and the biggest in the history of the video game business, would give Microsoft the “ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition.”

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Microsoft has said that the deal would benefit gamers and gaming companies alike, and has offered to sign a legally binding consent decree with the FTC to provide “Call of Duty” games to rivals for a decade.

The hearing is scheduled to proceed through June 29. Microsoft CEO Satya Nadella and Activision CEO Bobby Kotick are among the witnesses for next week.

A decision isn’t expected until after the Fourth of July holiday.

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If the judge declines to issue an injunction, Microsoft could move to close the deal ahead of a July 18 deadline and avert a $3 billion breakup fee.

Reuters contributed to this report.