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The Federal Trade Commission (FTC) filed a lawsuit this week, seeking to block Microsoft’s nearly $69 billion proposed acquisition of Activision Blizzard. If completed, Microsoft has claimed that the deal would make it the third-largest gaming company in the world, behind Tencent and Sony.
In December, the agency filed its first (and still pending) legal challenge to the deal. This time, it’s seeking a temporary restraining order and injunction ahead of the merger’s July 18 closing deadline.
The FTC alleges in the lawsuit that “with control of Activision’s content, Microsoft would have the ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition—including competition on product quality, price, and innovation. This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”
Across the pond, Microsoft has also faced challenges: In April, The UK’s Competition and Markets Authority (CMA) blocked the deal, with its reasoning centered on Microsoft’s hold on the cloud gaming market.
In October, Newzoo projected a likely 31.7 million users could spend a combined $2.4 billion on cloud gaming services and games by the end of the year, rising to an estimated user count of 86.9 million by 2025.
Microsoft has said it plans to appeal the UK and EU rulings.
Microsoft has made an effort to extend its gaming services beyond the Xbox, offering titles on other operating systems and devices while striking deals with publishers and developers to offer its games on their platforms.
Microsoft’s cloud gaming business, which includes Windows, Azure, and Xbox Cloud Gaming, accounts for about 60%–70% of global cloud gaming services, according to the CMA. In a press release announcing its decision, the CMA alleged that “allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development” of the sector.
Back in April, Activision settled a Department of Justice (DOJ) lawsuit over esports salaries. The suit alleged that a proposed “Competitive Balance Tax” in the Call of Duty and Overwatch leagues “effectively operated as a salary cap, penalized teams for paying esports players above a certain threshold, and limited player compensation in these leagues.” However, Activision claimed that it never actually levied the proposed tax, and that it was ditched in 2021.