US antitrust watchdog has sued Microsoft to stop its takeover of gaming giant Activision saying the deal would enable the company to suppress its competitors and harm consumers.
A little less than a year ago, Microsoft announced a $69 billion acquisition of the video game giant, Activision Blizzard, which makes popular games such as Call of Duty, World of Warcraft, Diablo, and Candy Crush.
If realised, it would become the biggest acquisition in Microsoft's history and for the video game industry.
But on Thursday, the US Federal Trade Commission (FTC) said it will be suing to block the deal.
According to the FTC, the purchase deal "would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business."
The anti-trust watchdog argues that Microsoft could use Activision's "must-have" content to privilege its own services, including its Xbox gaming platform, its Game Pass subscription service, and its cloud-based game offering.
It could also deny this content to its rival, Sony, to encourage consumers to use its Xbox console instead of Sony’s Playstation, and more broadly, Microsoft products and platforms instead of those of its rivals.
The FTC said in a complaint, which was voted 3-1, that Microsoft has a track record of acquiring and using valuable gaming content to suppress competition from rival consoles.
The agency said the Seattle-based technology firm made several titles from video game developer Bethesda its exclusives, after acquiring parent company ZeniMax, despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rivals.
"Microsoft has already shown that it can and will withhold content from its gaming rivals," said Holly Vedova, director of the FTC’s Bureau of Competition. "Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets."
FTC noted that Activision is one of a few top video game developers that create games for multiple devices, including consoles, PCs and mobile devices, with 154 million monthly active users around the world.
"With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers," it explained.
Microsoft's record offer also faces a probe in the UK, as that country's antitrust watchdog, Competition and Markets Authority, said in July it is considering whether the deal would "result in a substantial lessening of competition" in its markets.
Under FTC Chair and antitrust advocate Lina Khan, the stymieing of Microsoft's acquisition is the second big tech merger that the FTC has sought to challenge this year.
In July, the FTC challenged Meta's acquisition of virtual reality fitness app creator Within. Yesterday, an eight-day hearing started in San Francisco where a judge will hear the case.