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.
Microsoft CEO Satya Nadella speaks at the Axel Springer building in Berlin on Oct. 17, 2023. He received the annual Axel Springer Award.
Ben Kriemann | Getty Images
Among the thousands of Microsoft employees who lost their jobs in the cutbacks announced this week were 830 staffers in the company’s home state of Washington.
Nearly a dozen game design workers in the state were part of the layoffs, along with three audio designers, two mechanical engineers, one optical engineer and one lab technician, according to a document Microsoft submitted to Washington employment officials.
There were also five individual contributors and one manager at the Microsoft Research division in the cuts, as well as 10 lawyers and six hardware engineers, the document shows.
Microsoft announced plans on Wednesday to eliminate 9,000 jobs, as part of an effort to eliminate redundancy and to encourage employees to focus on more meaningful work by adopting new technologies, a person familiar with the matter told CNBC. The person asked not to be named while discussing private matters.
Scores of Microsoft salespeople and video game developers have since come forward on social media to announce their departure. In April, Microsoft said revenue from Xbox content and services grew 8%, trailing overall growth of 13%.
In sales, the company parted ways with 16 customer success account management staff members based in Washington, 28 in sales strategy enablement and another five in sales compensation. One Washington-based government affairs worker was also laid off.
Microsoft eliminated 17 jobs in cloud solution architecture in the state, according to the document. The company’s fastest revenue growth comes from Azure and other cloud services that customers buy based on usage.
CEO Satya Nadella has not publicly commented on the layoffs, and Microsoft didn’t immediately provide a comment about the cuts in Washington. On a conference call with analysts in April, Microsoft CFO Amy Hood said the company had a “focus on cost efficiencies” during the March quarter.
WATCH: Microsoft layoffs not performance-based, largely targeting middle managers
Technology
IPO market gets boost from Circle’s 500% surge, sparking optimism that drought may be ending
Jeremy Allaire, CEO and co-founder of Circle Internet Group, the issuer of one of the world’s biggest stablecoins, and Circle Internet Group co-founder Sean Neville react as they ring the opening bell, on the day of the company’s IPO, in New York City, U.S., June 5, 2025.
NYSE
For over three years, venture capital firms have been waiting for this moment.
Tech IPOs came to a virtual standstill in early 2022 due to soaring inflation and rising interest rates, while big acquisitions were mostly off the table as increased regulatory scrutiny in the U.S. and Europe turned away potential buyers.
Though it’s too soon to say those days are entirely in the past, the first half of 2025 showed signs of momentum, with June in particular producing much-needed returns for Silicon Valley’s startup financiers. In all, there were five tech IPOs last month, accelerating from a monthly average of two since January, according to data from CB Insights.
Highlighting that group was crypto company Circle, which more than doubled in its New York Stock Exchange debut on June 5, and is now up sixfold from its IPO price for a market cap of $42 billion. The stock got a big boost in mid-June after the Senate passed the GENIUS Act, which would establish a federal framework for U.S. dollar-pegged stablecoins.
Venture firms General Catalyst, Breyer Capital and Accel now own a combined $8 billion worth of Circle stock even after selling a fraction of their holdings in the offering. Silicon Valley stalwarts Greylock, Kleiner Perkins and Sequoia Capital are set to soon profit from Figma’s IPO, after the design software vendor filed its public prospectus on Tuesday. Since its $20 billion acquisition agreement with Adobe was scrapped in late 2023, Figma has been one of the most hotly anticipated IPOs in startup land.
It’s “refreshing and something that we’ve been waiting for for a long time,” said Eric Hippeau, managing partner at early-stage venture firm Lerer Hippeau, regarding the exit environment. “I’m not sure that we are confident that this can be a sustained trend yet, but it’s been very encouraging.”
Another positive sign for the industry the past couple months was the performance of artificial infrastructure provider CoreWeave, which went public in late March. The stock was relatively stagnant for its first month on the market but shot up 170% in May and another 47% in June.
For venture firms, long considered the lifeblood of risky tech startups, IPOs are essential in order to generate profits for the university endowments, foundations and pension funds that allocate a portion of their capital to the asset class. Without handsome returns, there’s little incentive for limited partners to put money into future funds.
After a record year in 2021, which saw 155 U.S. venture-backed IPOs raise $60.4 billion, according to data from University of Florida finance professor Jay Ritter, every year since has been relatively dismal. There were 13 such offerings in 2022, followed by 18 in 2023 and 30 last year, collectively raising $13.3 billion, Ritter’s data shows.
The slowdown followed the Federal Reserve’s aggressive rate-hiking campaign in 2022, meant to slow crippling inflation. As the lower-growth environment extended into years two and three, venture firms faced increasing pressure to return cash to investors.
‘Backlog of liquidity’
In its 2024 yearbook, the National Venture Capital Association said that even with a 34% increase in U.S. VC exit value last year to $98 billion, that number is 87% below the 2021 peak and less than half the average for the four years from 2017 through 2020. It’s a troubling dynamic for the 58,000 venture-backed companies that have raised a total of $947 billion from investors, according to the annual report, which is produced by the NVCA and PitchBook.
“This backlog of liquidity drought risks creating a ‘zombie company’ cohort — businesses generating operational cash flow but lacking credible exit prospects,” the report said.
Other than Circle, the latest crop of IPOs mostly consists of smaller and lesser-known brands. Health-tech companies Hinge Health and Omada Health are valued at about $3.5 billion and $1 billion, respectively. Etoro, an online trading platform, has a market cap of just over $5 billion. Online banking provider Chime Financial has a higher profile due largely to a years-long marketing blitz and is valued at close to $11.5 billion.
Meanwhile, the highest valued private companies like SpaceX, Stripe and Databricks remain on the sidelines, and AI highfliers OpenAI and Anthropic continue to raise massive amounts of cash with no intention of going public anytime soon.
Still, venture capitalists told CNBC that there are plenty of companies with the financial metrics to be public, and that more of them are readying for the process.
“The IPO market is starting to open and the VC world is cautiously optimistic,” said Rick Heitzmann, a partner at venture firm FirstMark in New York. “We are preparing companies for the next wave of public offerings.”
There are other ways to make money in the meantime. Secondary sales, a process that involves selling private shares to new investors, are on the rise, allowing early employees and investors to get some liquidity.
And then there’s what Mark Zuckerberg is doing, as he tries to position his company at the center of AI innovation and development.
Mark Zuckerberg, chief executive officer of Meta Platforms Inc., during the Meta Connect event on Wednesday, Sept. 25, 2024.
Bloomberg | Bloomberg | Getty Images
Last month, Meta announced a $14 billion bet on Scale AI, taking a 49% stake in the AI startup in exchange for poaching founder Alexandr Wang and a small group of his top engineers. The deal effectively bought out half of the stock owned by investors, leaving them with the opportunity to make money on the rest of their holdings, should a future acquisition or IPO take place.
The deal is a big win for Accel, which led Scale AI’s Series A round in 2017, and is poised to earn more than $2.5 billion in the transaction. Index Ventures led the Series B in 2018, and Peter Thiel’s Founders Fund led the Series C the following year at a valuation of over $1 billion.
Investors now hope the Federal Reserve will move toward a rate-cutting campaign, though the central bank hasn’t committed to one. There’s also ongoing optimism that regulators will make going public less burdensome. Last week, Reuters reported, citing sources familiar with the matter, that U.S. stock exchanges and the SEC have discussed loosening regulations to make IPOs more enticing.
Mike Bellin, who heads consulting firm PwC’s U.S. IPO practice, said he anticipates a diversity of IPOs across sectors in the second half of the year. According to data from PwC, pharma and fintech were among the most active sectors for deals through the end of May.
While the recent trend in IPO activity is an encouraging sign for investors, potential roadblocks remain.
Tariffs and geopolitical uncertainty delayed IPO plans from companies including Klarna and StubHub in April. Neither has provided an update on when they plan to debut.
FirstMark’s Heitzmann said the path forward is “not at all clear,” adding that he wants to see a strong quarter of economic stability and growth before confidently saying that the market is wide open.
Additionally, other than CoreWeave and Circle, recent tech IPOs haven’t had big pops. Hinge Health, Chime and eToro have seen relatively modest gains from their offer price, while Omada Health is down.
But virtually any activity beats what VCs were experiencing the last few years. Overall, Hippeau said recent IPO trends are generally encouraging.
“There’s starting to be kind of light at the end of the tunnel,” Hippeau said.
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