This is a huge blow for Microsoft which is currently engaged in the race to develop powerful artificial intelligence tools as quickly as possible in order to stay ahead in the AI revolution which is overthrowing everything in its path.
The software giant hasn’t seen such a hectic and exciting time since the cloud.
But the Redmond, Wash.-based company has just experienced a hiccup. This setback has been inflicted on it on the video game front and is related to its current acquisition of the game publisher Activision Blizzard.
The Federal Trade Commission (FTC), one of the most powerful American competition regulators, asked a federal court in San Francisco on June 12 to temporarily block Microsoft’s $68.7 billion acquisition of Activision Blizzard (ATVI) – Get Free Report. This operation which would make the computer giant the third largest player in video games.
The regulator is asking the court to issue a restraining order and a preliminary injunction because it fears that Microsoft (MSFT) – Get Free Report and Activision will finalize their merger even though it has received a veto from the British competition authorities and an administrative procedure is underway in the United States.
Fears Microsoft May Withhold Popular Franchises
The federal agency had already launched an administrative procedure to determine the risks associated with this acquisition, and a hearing is scheduled for August 2, but “press reports began circulating suggesting that defendants [Microsoft and Activision] were seriously contemplating closing the proposed acquisition despite the pending administrative litigation and the CMA [United Kingdom Competition and Markets Authority]orders,” the FTC said in its complaint that you can read here.
The FTC fears that once Activision is in the fold of Microsoft, the owner of Windows will “withhold or degrade” the games it will get its hands on by playing on price and quality. Microsoft could also harm competitors by “withholding” content from them entirely.”
What the federal agency wants to say is that it fears that the group co-founded by Bill Gates is implementing tricks that would prevent Activision’s most popular games from arriving on its Xbox’s rival consoles. For example, there is the fear that owners of Sony’s PlayStation consoles and others will have to pay more to play the very popular franchises Diablo, Overwatch and Call of Duty.
“Activision’s content is extremely important for, and drives adoption of, video game consoles. Given their immense popularity, Activision’s titles are of particular importance to console makers, including Microsoft’s competition,” the FTC said in its complaint.
It argued that: “The proposed acquisition is reasonably likely to substantially lessen competition or tend to create a monopoly in multiple markets because it will create a combined firm with the ability and increased incentive to use its control of Activision titles to disadvantage Microsoft’s competitors. The Proposed Acquisition also may accelerate an ongoing trend towards vertical integration and consolidation in, and raise barriers to entering, the relevant markets.”
Microsoft And Activision Welcome the Action
In view of these fears, the FTC believes a restraining order “is necessary to preserve the status quo and protect competition while the Court considers the Commission’s application for a preliminary injunction.”
“Should the Commission rule, after the full administrative proceeding, that the proposed acquisition is unlawful, reestablishing the status quo would be difficult, if not impossible, if the proposed acquisition has already occurred,” the FTC argued.
The FTC’s request comes just a month before Microsoft and Activision’s scheduled date — July 18 — to finalize their deal. The FTC hearing is scheduled for August 2, while Microsoft and Activision’s appeal in the UK is also scheduled after July 18.
The European Commission last month approved the deal.
Microsoft said it welcomes the FTC’s action.
“We welcome the opportunity to present our case in federal court,” the company’s president Brad Smith said. ” We believe accelerating the legal process in the US will ultimately bring more choice and competition to the market.”
Activision CEO Bobby Kotick echoed the same sentiment in an email to employees.
“This is a welcome update and one that accelerates the legal process. We will now have the opportunity to more quickly present the facts about our merger,” Kotick wrote in an email that you can read here.
“Our excellent legal team has been preparing for this move for more than a year, and we’re ready to present our case to a federal judge who can evaluate the transaction on the merits.”