The US is entering a legal battle with Xbox-maker Microsoft to block its plan to purchase the gaming firm behind hit titles such as Call of Duty.
Regulators cited competition concerns, saying they feared that if the deal went through, Activision Blizzard’s games would stop being offered on non-Microsoft gaming consoles.
The Activision purchase was set to be the biggest in Microsoft history.
The company said it would fight to complete the $69bn (£56bn) deal.
Microsoft president Brad Smith said the company had “complete confidence in our case and welcome the opportunity to present our case in court”.
The complaint against Microsoft is among the most-high profile legal fights to emerge from US President Joe Biden’s pledge to take a harder line against monopolies.
The planned deal had already raised concerns in other countries, including the UK.
Activision Blizzard owns some of the most popular games in the world, including the Call of Duty series, World of Warcraft, Overwatch, and Candy Crush.
The Federal Trade Commission, the US consumer watchdog that filed the complaint, said that Activision was one of a small number of top video game developers that made high-quality games for multiple devices.
The deal would give Microsoft “both the means and motive to harm competition” by manipulating pricing, making games worse on its competitors’ video game consoles, “or withholding content from competitors entirely, resulting in harm to consumers,” the agency said in a press release.
The FTC pointed to Microsoft’s acquisition of ZeniMax, which owns video game studio Bethesda Softworks. Microsoft has said several of the studio’s future games will be exclusive to Microsoft consoles.
Microsoft earlier this week said it had agreed to make Call of Duty available on Nintendo for 10 years if the purchase went through and made a similar offer to rival Sony.
“This sounds alarming, so I want to reinforce my confidence that this deal will close,” Activision Blizzard chief executive Bobby Kotick wrote in a letter to staff that was shared on the company’s website. “The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge.”
Content is king, or so the saying goes.
Historically, you would choose which games to buy depending on which bit of hardware you owned – whether that was a Nintendo, Sony, Sega (remember them?) or Microsoft. Back then you could argue consoles were king.
But in recent years more and more big titles like Fifa, Call of Duty and Fortnite offer the same experience on multiple platforms, making the device you own less of a fundamental issue to accessing the games you love.
This has led to a battle over content – with big companies like Tencent, Microsoft and Sony buying up games developers to try and make sure they are offering something unique in such a competitive marketplace.
What’s different here is the sheer scale of the purchase and the massive mainstream appeal of the games under discussion.
Given everything that has been said publicly by Microsoft and Activision it is unlikely that should this deal go through it would mean that one day in the near future PlayStation users would be unable to play the latest Call of Duty.
However, it could mean that people who pay for Microsoft’s GamePass get the game first, as part of the subscription price or have some bespoke content unique to them.
PlayStation and now the FTC claim that this in and of itself is enough to distort the market. Microsoft argues it boosts player choice.
Now it is up to a judge to decide.
When it announced the deal, Microsoft said it was aiming to expand the games available on GamePass, its Netflix-style subscription gaming service and for the increasing number of people using phones to play games.
The takeover was set to make the company the third largest gaming firm in the world by revenue, behind China’s Tencent and Japan’s Sony, which owns PlayStation and has criticised the deal.
It could be forced to pay a breakup fee of as much as $3bn if the deal fails.
FTC chair Lina Khan, who made her name critiquing the US government’s historic failures to rein in Big Tech, and two Democratic commissioners voted in favour of filing the lawsuit. The Republican commissioner opposed the move.