FTC sues to block Microsoft’s acquisition of Activision Blizzard
The Federal Trade Commission said on Thursday it has filed an antitrust case against Microsoft to challenge the software maker’s attempt to acquire video game publisher Activision Blizzard, claiming it would violate U.S. law.
This isn’t Microsoft’s first time dealing with competitive pressure. In 1998 the U.S. Justice Department filed a broad antitrust case against the company. Microsoft changed some practices related to its Windows operating system business as a result. Regulators in the United Kingdom are looking into whether the Activision Blizzard acquisition would lessen competition in the country.
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Microsoft announced plans to acquire Activision Blizzard for $68.7 billion in January, with the goal of closing it by June 2023. The deal has come under pressure from Microsoft’s competitors in gaming, such as Sony. Microsoft has repeatedly said it won’t be the world’s leader in gaming if the deal were to close, and it has vowed to provide popular “Call of Duty” games on gaming platforms other than those owned by Microsoft.
“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Brad Smith, Microsoft’s vice chair and president, said in a statement. “We have been committed since Day One to addressing competitive 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.”
FTC commissioners voted 3-1 to move forward with the agency’s administrative complaint, which will go before the FTC’s internal administrative law judge. In that process, the ALJ makes an initial decision after a trial-like proceeding. The respondent or FTC staff serving as “complaint counsel” can choose to appeal the initial decision to the full commission for a vote. After that, the respondent could still ask a federal appeals court to review the commission’s order.
“With control of Activision’s content, Microsoft would have the ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition — including competition on product quality, price, and innovation,” the FTC said in its complaint. “This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”
In the statement, the FTC said Microsoft has a record, including with its 2021 ZeniMax deal, of buying games and using the moves to suppress competition from other companies that make consoles. Microsoft promised the European Commission antitrust officials that the company wouldn’t have an incentive to stop people from playin ZeniMax games on consoles other than the Xbox, but after the European Commission permitted the deal to proceed, Microsoft announced that it was making ZeniMax games such as Elder Scrolls VI, Redfall and Starfield into exclusives, the FTC said in its suit.
The FTC said Activision Blizzard has brought its games to a variety of devices, irrespective of their manufacturers, but that might change if Microsoft were to complete the deal. Microsoft could adjust prices or worsen the experience on competing hardware such as Sony PlayStation consoles, or keep Activision Blizzard consoles from reaching consoles other than Microsoft Xbox systems, the agency said.
Microsoft does offer titles that are exclusive to the Xbox, and in October Phil Spencer, CEO of gaming at Microsoft, pointed out that Sony has its own set of exclusive franchises, but over time Microsoft has brought games such as Minecraft to other devices. He argued that it’s important for more people, not less, to play games the company owns.
Microsoft is seeking to add subscribers to its Game Pass service that provides access to hundreds of games. The Game Pass Ultimate subscription tier also allows people to play games that stream from Microsoft data centers on a variety of devices, including smartphones.
The FTC said in its case that the proposed acquisition is reasonably likely to reduce competition or bring about monopolies in the markets for gaming subscription services, cloud gaming and high-performance consoles.
“We want Call of Duty to be enjoyed by more players around the world. That requires COD being on diverse platforms after the merger of Microsoft + Activision Blizzard,” Lulu Cheng Meservey, Activision’s executive vice president for corporate affairs and communications chief, said in a tweet.
The lawsuit represents a major milestone for FTC Chair Lina Khan, who has long signaled aggressive action on tech. While her tenure has included a lawsuit seeking to block Facebook owner Meta from acquiring a virtual reality fitness app developer, the lawsuit seeking to block the Microsoft-Activision deal is notable for its scale, as the largest technology transaction to date.
Khan and her counterpart at the Justice Department’s antitrust division, Jonathan Kanter, have said they want the agencies to become more comfortable with taking big swings, adding that a high win record in court likely means they aren’t challenging enough cases.
Federal enforcers have seen a string of losses in merger challenges in recent months, with the exception of one significant win by the Department of Justice in its case against Penguin Random House’s proposed acquisition of Simon & Schuster.
The FTC’s administrative law judge rejected the commission’s challenge of Illumina’s proposed acquisition of Grail in the biotech space, though the FTC said it will appeal that ruling. The Antitrust Division has also said it’s appealing or considering appealing the three merger cases it lost so far: UnitedHealth Group-Change Healthcare, US Sugar-Imperial Sugar and Booz Allen Hamilton-EverWatch.
Smith previewed Microsoft’s arguments against blocking the deal in a Wall Street Journal opinion piece published earlier this week, saying it would be a “huge mistake.”
“Microsoft faces huge challenges in the gaming industry,” Smith wrote, adding that its Xbox console gaming system is in third place behind Sony’s PlayStation and the Nintendo Switch. Microsoft also has “no meaningful presence in the mobile game industry,” he said. He pointed attention toward Apple and Google, saying that while mobile gaming is a fast growing and high revenue segment, those two app store operators take a “significant portion” of those earnings through their fees on developers.
Activision Blizzard does have a place on mobile devices thanks to its 2016 acquisition of King, which publishes the Candy Crush Saga game. The Candy Crush franchise has over 200 million monthly active users, Activision Blizzard said in November.
Smith noted that Microsoft’s purchase of Activision would let it compete effectively in the gaming industry, spurring innovation and helping customers. He downplayed concerns voiced by competitors such as Sony, saying the company is “as excited about this deal as Blockbuster was about the rise of Netflix.”
Activision Blizzard shares reached a session low of $73 per share after the FTC announced its case. Microsoft had agreed to pay $95 per share.
Bobby Kotick, Activision Blizzard’s CEO, told employees in a memo that the assertion that the deal is anti-competitive doesn’t match with the facts.
“Simply put, a combined Microsoft-ABK will be good for players, good for employees, good for competition and good for the industry,” he wrote. “Our players want choice, and this gives them exactly that.”
Politico reported last month that the FTC was likely to try to block the deal.
Technology
A ‘seismic’ Nvidia shift, AI chip shortages and how it’s threatening to hike gadget prices
The logo of an Apple Store is seen reflected on the glass exterior of a Samsung flagship store in Shanghai, China Monday, Oct. 20, 2025.
Wang Gang | Feature China | Future Publishing | Getty Images
The cost of your smartphone might rise, analysts are warning, as the AI boom clogs up supply chains and a recent change by Nvidia to its products could make it worse.
AI data centers, on which tech giants globally are spending hundreds of billions of dollars, require chips from suppliers, like Nvidia, which relies on many different components and companies to create its coveted graphics processing units.
But other companies like AMD, the hyperscalers like Google and Microsoft, and other component suppliers all rely on this supply chain.
Many parts of the supply chain can’t keep up with demand, and it’s slowing down components that are critical for some of the world’s most popular consumer electronics. Those components are seeing huge spikes in prices, threatening price rises for the end product and could even lead to shortages of some devices.
“We see the rapid increase in demand for AI in data centers driving bottlenecks in many areas,” Peter Hanbury, partner in the technology practice at Bain & Company, told CNBC.
Where is the supply chain clogged?
One of the starkest assessments came from Alibaba CEO Eddie Wu, CEO of Chinese tech giant Alibaba.
Wu, whose company is building its own AI infrastructure and designs its own chips, said last week that there are shortages across semiconductor manufacturers, memory chips and storage devices like hard drives.
“There is a situation of undersupply,” Wu said, adding that the “supply side is going to be a relatively large bottleneck.” He added this could last two to three years.
Bain and Co.’s Hanbury said there are shortages of hard disk drives, or HDDs, which store data. HDDs are used in the data center. These are preferred by hyperscalers,: big companies like Microsoft and Google. But, with HDDs at capacity, these firms have shifted to using solid-state drives, or SSDs, another type of storage device.
However, these SSDs are key components for consumer electronics.
The other big focus is on a type of chip under the umbrella of memory called dynamic random-access memory or DRAM. Nvidia’s chips use high-bandwidth memory which is a type of chip that stacks multiple DRAM semiconductors.
Memory prices have surged as a result of the huge demand and lack of supply. Counterpoint Research said it expects memory prices to rise 30% in the fourth quarter of this year and another 20% in early 2026. Even small imbalances in supply and demand can have major knock on effects on memory pricing. And because of the demand for HBM and GPUs, chipmakers are prioritizing these over other types of semiconductors.
“DRAM is certainly a bottleneck as AI investments continue to feed the imbalance between demand and supply with HBM for AI being prioritized by chipmakers,” MS Hwang, research director at Counterpoint Research, told CNBC.
“Imbalances of 1-2% can trigger sharp price increases and we’re seeing that figure hitting 3% levels at the moment – this is very significant.”
Why are there issues?
Building up capacity in various areas of the semiconductor supply chain can be capital-intensive. And it’s an industry that’s known to be risk-averse and did not add the capacity necessary to meet the projections provided by key industry players, Bain & Co.’s Hanbur said.
“The direct cause of the shortage is the rapid increase in demand for data center chips,” Hanbury said.
“Basically, the suppliers worried the market was too optimistic and they did not want to overbuild very expensive capacity so they did not build to the estimates provided by their customers. Now, the suppliers need to add capacity quickly but as we know, it takes 2-3 years to add semiconductor manufacturing fabs.”
Nvidia at the center
A lot of attention is on Nvidia given it dominates when it comes to the chips that are being put into AI data centers.
It is a huge customer of high bandwidth memory, for example. And its products are manufactured by TSMC which also has other major customers like Apple.
But analysts are focused on a change Nvidia has made to its products that has the potential to add major pressure to consumer electronics supply chains. The U.S. giant is increasingly shifting toward using a type of memory in its products called Low-Power Double Data Rate (LPDDR). This is seen as more power efficient than the previous Double Data Rate, or DDR memory.
The problem is, Nvidia is increasingly using the latest generation of LPDDR memory, which is also used by high-end consumer electronics makers such as Samsung and Apple.
Typically, the industry would just be dealing with demand for this product from a handful of big electronics players. But now Nvidia, which has huge scale, is entering the mix.
“We also see a bigger risk on the horizon is with advanced memory as Nvidia’s recent pivot to LPDDR means they’re a customer on the scale of a major smartphone maker — a seismic shift for the supply chain which can’t easily absorb this scale of demand,” Hwang from Counterpoint Research said.
How AI boom is impacting consumer electronics
Here’s the link between all of this.
From chip manufacturers like TSMC, Intel and Samsung, there is only so much capacity. If there is huge demand for certain types of chips, then these companies will prioritize those, especially from their larger customers. That can lead to shortages of other types of semiconductors elsewhere.
Memory chips, in particular DRAM which has seen prices shoot up, is of particular concern because it’s used in so many devices from smartphones to laptops. And this could lead to price rises in the world’s favorite electronics.
DRAM and storage represent around 10% to 25% of the bill of materials for a typical PC or smartphone, according to Hanbury of Bain & Co. A price increase of 20% to 30% in these components would increase the total bill of materials costs by 5% to 10%.
“In terms of timing, the impact will likely start shortly as component costs are already increasing and likely accelerate into next year,” Hanbury said.
On top of this, there is now demand from players involved in AI data centers like Nvidia, for components that would have typically been used for consumer devices such as LPDDR which adds more demand to a supply constrained market.
If electronics firms can’t get their hands on the components needed for their devices because they’re in short supply or going toward AI data centers, then there could be shortages of the world’s most popular gadgets.
“Beyond the rise in cost there’s a second issue and that’s the inability to secure enough components, which constrains the production of electronic devices,” Counterpoint Research’s Hwang said.
What are tech firms saying?
A number of electronics companies have warned about the impact they are seeing from all of this.
Xiaomi, the third-biggest smartphone vendor globally, said it expects that consumers will see “a sizeable rise in product retail prices,” according to a Reuters reported this month.
Jeff Clark, chief operating officer at Dell, this month said the price rises of components is “unprecedented.”
“We have not seen costs move at the rate that we’ve seen,” Clark said on an earnings call, adding that the pressure is seen across various types of memory chips and storage hard drives.
The unintended consequences
The AI infrastructure players are using similar chips to those being used in consumer electronics. These are often some of the more advanced semiconductors on the market.
But there are legacy chips which are manufactured by the same companies that the AI market is relying on. As these manufacturers shift attention to serving their AI customers, there could be unintended consequences for other industries.
“For example, many other markets depend on the same underlying semiconductor manufacturing capabilities as the data center market” including automobiles, industrials and aerospace and defense, which “will likely see some impact from these price increases as well,” Hanbury said.
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