Rich Polk
Activision Blizzard stock (NASDAQ:ATVI) saw some volatility on reports that the Federal Trade Commission has filed suit to block Microsoft's (NASDAQ:MSFT) $69B acquisition of the videogame publisher, but has largely made up a decline on the news and is back to a 1.4% decline for Thursday's session.
The commission voted to go forward with a lawsuit after a few hours of meeting, according to media reports, despite a full-court press by Microsoft in recent days to try to fend off such an effort.
It would mark the biggest regulatory threat to Microsoft in 20 years, since the DOJ's landmark antitrust suit against the company. Microsoft stock (MSFT) has pared some gains and is up 1% Thursday afternoon.
The FTC is seeking to block the deal saying that it "would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business."
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said FTC Competition Bureau Director Holly Vedova. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”
The FTC says its complaint notes Microsoft's record of acquiring and using gaming content to suppress rival console competition - including acquiring Bethesda Softworks parent ZeniMax, after which Microsoft made several titles Microsoft exclusives despite assurances to the contrary.
The FTC's vote came on party lines, with three Democrats in favor of the complaint and one Republican against, according to The Washington Post.
"We fully expect Microsoft to fight for this Activision deal and not back down," Wedbush analyst Dan Ives said in response to the FTC's action. "Likely now heads to court with FTC lawsuit. Sets up battle between Redmond and FTC to save the Activision deal which remains very important to [Microsoft CEO Satya] Nadella and MSFT. Setting up for 2023 court battle."
“This is the boldest move that the Biden administration antitrust agencies have taken to police mergers,” Willam Kovacic, a former FTC chairman, said in an interview on CNBC.
Updated: "We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court," Microsoft President Brad Smith said in a statement.
Activision Blizzard CEO Bobby Kotick sounded upbeat in a letter to staff, saying "This sounds alarming, so I want to reinforce my confidence that this deal will close."
"The allegation that this deal is anticompetitive doesn't align with the facts, and we believe we'll win this challenge."
The competitive landscape is "shifting" in the industry, Kotick reportedly said, and "We believe these arguments will win despite a regulatory environment focused on ideology and misconceptions about the tech industry."
Microsoft's efforts included reportedly sending Smith to Washington to urge commissioners not to block the deal.
A Seeking Alpha survey of analysts and traders indicated that Activision Blizzard stock could drop to $71 per share (about a 5% decline) if the FTC went forward with a suit.