FTC is likely to file antitrust lawsuit against Microsoft's proposed $69B Activision merger

A new report by Politico revealed that there is a chance that Federal Trade Commission would file an antitrust lawsuit to stop the $69 billion Activision merger proposed by Microsoft. In case an administrative lawsuit is filed at the end of 2022 or in January 2023, which would be unlikely to be resolved before the July deadline of the deal, Politico says that Microsoft and Activision would be forced to abandon the merger.

Despite this threat, the report stresses that the lawsuit is not yet certain, in addition to the fact that four commissioners of the FTC still have to vote out a complaint or meet with the companies’ lawyers.

According to Politico’s sources, the FTC staff involved in the deal’s review are doubting the companies’ arguments. In the statement of the individuals with knowledge of the situation, it is said that FTC is concerned about how the deal would boost Microsoft’s gaming business. Aside from Call of Duty, the sources told Politico that agency investigators are studying whether future unannounced titles would benefit the Redmond tech company. 

The report further underlines that FTC’s action is not currently necessary since the second-level investigations from UK’s Competition and Markets Authority and the European Union have already started. These probes should be enough to prevent the deal from closing. Yet, in any case the agency pushes for the lawsuit, Politico says “it would likely bring a case in its own in-house administrative court.”

“The agency typically challenges deals first in federal court to block them with a temporary injunction pending a trial in its in-house court,” Politico explains. “Without the imminent risk of the deal closing, however, it would be difficult to get a temporary injunction.”

The two companies need to close the proposed merger by July 2023 without agreement renegotiations, but an administrative lawsuit that will take time to be resolved might prevent them from reaching the target month. After this revelation, Activision stock fell 4.5% in after-hours trading on Wednesday, though Microsoft’s stock increased slightly.

In September, Microsoft CEO Satya Nadella said that the company was “very, very confident” that the deal would be closed. However, new challenges related to the deal started. Aside from the deeper probes from the regulators, the true intention behind the merger is also being questioned now after allegations that it was pushed to protect Activision CEO Bobby Kotick. With this, Nadella told CNBC in an interview this month that even with the possibility of the deal not becoming a reality, Microsoft “will be in gaming going forward.”