US competition regulators have moved to block Microsoft’s $69bn (£56bn) takeover of Call of Duty maker Activision Blizzard.
The Federal Trade Commission’s (FTC) action threatens the tech giant’s plans to rapidly expand its gaming portfolio and catch up to rivals.
MicrosoftRecord-breaking deal planned, says company with Xbox console and gaming network platform announced in january Will help it compete with industry leaders Tencent and Sony game consoleboth of which have criticized the takeover.
Without Activision and its wide range of titles across mobile, consoles and PC, the company may have struggled to attract users to use its subscription service to access games.
Subscriptions have become a top priority for big tech companies as traditional areas of growth, such as ad sales, have become less reliable.
The commission, which enforces competition law, said in its complaint that Microsoft has a record of hoarding valuable game content.
It cites Microsoft’s previous gaming acquisitions, notably of well-known developer Bethesda Softworks and its parent company ZeniMax, as an example of how the company is working on some upcoming Xbox exclusives despite reassuring European regulators It has no intention of doing so.
“Microsoft has demonstrated that it can and will withhold content from its gaming competitors,” said Holly Vedova, director of the FTC’s Bureau of Competition.
“Today, we sought to prevent Microsoft from gaining control of a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing game markets.”
The agency has scheduled a hearing before an administrative law judge in August 2023.
Microsoft boss Brad Smith has vowed to oppose the move.
“While we believe in giving peace a chance, we are confident in our case and welcome the opportunity to present our case in court,” he said.
The administration of U.S. President Joe Biden has taken a more aggressive approach to enforcing competition laws.
The US Justice Department recently blocked a $2.2bn (£1.7bn) merger between Penguin Random House, the world’s largest book publisher, and smaller US rival Simon & Schuster.
The FTC said it was concerned that Activision’s hit titles, including World of Warcraft and Diablo, would not continue to be available on a range of consoles, PCs and mobile devices.
While Microsoft has suggested concessions to address competition concerns, rapid changes in the tech and gaming industries could render those conditions useless over time.
This month, avoiding criticism, Microsoft made a 10-year commitment to bring the popular first-person shooter series Call of Duty to the Nintendo platform.
Microsoft also made the same proposal to Sony.
Activision Blizzard CEO Bobby Kotick told employees on Thursday that he believed the deal would go ahead.
“The allegations that this deal is anti-competitive are untrue and we believe we will win this challenge,” he said.
He believes the companies’ arguments will succeed “despite a regulatory environment focused on ideology and misconceptions about the tech industry”.
The deal also faces scrutiny in the UK and Brussels.
Investigation by the UK Competition and Markets Authority (CMA) announced in julyand in September, regulators decided there were enough problems Move investigation to phase two.
in october, The public is invited to comment on the acquisition.
The CMA is working towards a March 2023 deadline to publish its final report.