FTC files to block Microsoft’s $69B Activision Blizzard acquisition [Updated]

[Update, 6:30 pm ET: The FTC filed its complaint (PDF) for a temporary restraining order and preliminary injunction against Microsoft and Activision Blizzard's injunction. The complaint claims that the parties "may consummate the Proposed Acquisition at any time," despite pending actions with both the FTC and the UK antitrust authority.

The complaint specifically cites the long success of the Call of Duty franchise, the instant success of Diablo IV, and Overwatch 2 as "a successful new title," in suggesting why Microsoft's ownership of both Activision and its own gaming platforms would be problematic. A merger, the FTC writes, would be "reasonably likely to substantially lessen competition and/or tend to create a monopoly" in "high-performance consoles, multi-game content library subscription services, and cloud gaming subscription services."

Activision Blizzard CEO Bobby Kotick emailed his employees Monday, characterizing the FTC's action as "a positive development in our merger process." Moving the case to federal court "accelerates the legal process," Kotick wrote, noting that the company's "excellent legal team has been preparing for this move for more than a year." Kotick suggests the merger will "support our hundreds of millions of players," "protect American workers," increase shareholder value, and "Enables two American companies to more effectively compete against the global competitors that dominate the video game industry around the world."

Microsoft President Brad Smith tweeted a similar sentiment late Monday. "We always prefer constructive and amicable paths with governments but have confidence in our case and look forward to presenting it."]

Original post: A source has told Reuters that the US Federal Trade Commission (FTC) will file an injunction seeking to block Microsoft's acquisition of Activision Blizzard in a $69 billion deal.

The FTC had previously filed a lawsuit  in December seeking to block the deal, arguing that Microsoft's acquisition of the major game studio would allow it to "suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business." In that filing, the FTC pointed to Microsoft's prior acquisition of Bethesda Software's parent company, Zenimax, and the subsequent making of its upcoming epic RPG Starfield exclusive to Windows and Xbox, despite Microsoft's prior statements to European antitrust authorities.

That case is still pending with an internal administrative law judge, with a hearing set for August. Those proceedings don't have the power to entirely halt the deal, as a source close to the merger proceedings told Ars Technica in January. By filing for a preliminary injunction, the FTC now aims to prevent the deal from going through before a July 18 deadline, potentially voiding the deal and sending the companies back to the bargaining table.

"We welcome the opportunity to present our case in federal court," Microsoft President Brad Smith told CNBC. "We believe accelerating the legal process in the US will ultimately bring more choice and competition to the market.”

Microsoft and Activision Blizzard are also facing strong opposition from the United Kingdom's Competition and Markets Authority, which blocked the deal in April. The Authority was particularly concerned about the deal's effect on the UK market for cloud-based gaming, something Microsoft has aimed to appease by signing deals to offer library games to Nvidia's GeForce Now and the more European-focused Boosteroid. Over the weekend, Microsoft announced that Game Pass titles for PC would also be available on GeForce Now.

This post will be updated as the story develops.