The FTC sues Microsoft to block its Activision Blizzard merger

The Federal Trade Commission is blocking Microsoft's in-progress acquisition of Activision Blizzard, reports the Washington Post. Voting to issue a lawsuit against the Xbox maker commenced in administrative court, and three Democrats voted in favor of it. 

In what's the biggest move from the FTC since Lina Khan became its chair, the organization is suing the Xbox maker to prevent it from acquiring the Call of Duty publisher. This was previously rumored to occur last month, and comes not long after a reported rift in the FTC was believed to be a boon to Microsoft's acquisition efforts.

As Axios notes, however, the organization chose to file its complaint in an administrative court rather than a federal one. Additionally, it hasn't filed an injunction to stop the deal from closing, making it's still possible for the deal to close.

“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," wrote FTC's Bureau of Competition director Holly Vedova.

Per an anonymous FTC official speaking to the Washington Post, Microsoft's acquisition would result in it becoming a larger player in the games space, potentially resulting in an unfair advantage for subscription and cloud-based game markets. Innovation in those markets would be greatly diminished, the official said. 

Xbox exclusive games were another listed reason for preventing the merger, according to the FTC's statement. Citing Bethesda's upcoming Starfield and Redfall as examples, the organization wrote that Microsoft has "already shown that it can and will withhold content from its gaming rivals."

Following the FTC's lawsuit, Activision Blizzard's Lulu Cheng Meservey wrote that the FTC's ruling of the merger as anticompetitive "ignores facts. the deal benefits gamers and the industry, especially given competition from abroad. We look forward to proving our case in court and closing our deal with Microsoft."

For Microsoft, this marks the tech company's first antitrust lawsuit in 20 years. The company has since made efforts to avoid the Department of Justice, which has turned its attention recently to other tech companies like Meta.

Prior to this lawsuit, Microsoft pitched a potential 10-year licensing agreement with Sony for the PlayStation publisher to have Call of Duty for a decade. Though that move was made primarily to appease the European Commission, which launched an investigation into the deal in November, it was unclear if that tactic would work on the FTC. 

While Sony has yet to come to terms with Microsoft on that agreement, Microsoft made a similar offer to both Nintendo and Valve, which those two publishers accepted earlier this week.