The regulator contends that the lower-court judge who ruled in favor of the merger held the agency to an excessively high standard, according to the report. The agency believes that it only needs to demonstrate that the deal raises serious competitive concerns, rather than proving it is anticompetitive.
The FTC also argues that the judge erred in relying on deals Microsoft struck with rivals to distribute games as evidence that the merger would not harm competition, the report said.
Microsoft closed its $69 billion deal to acquire Activision Blizzard in October after obtaining the approval of British regulators, per the report.
The FTC filed its lawsuit in December 2022, arguing that the merger would harm competition in the gaming industry, according to the report. The agency claims that Microsoft would use Activision’s popular games to suppress competition to its Xbox consoles and dominate the fast-growing subscription and cloud gaming businesses.
The FTC faces an uphill battle in its attempt to block the acquisition, the report said. It lost the initial legal fight, and both the European Union and Britain have approved the deal.
Microsoft is expected to argue that the judge’s ruling was correct and that the FTC failed to show any errors, per the report.
The legal battle between the FTC and Microsoft is part of a larger effort by the Biden administration to regulate mergers and prevent price hikes that impact consumers, the report said. The administration is focused on various sectors, including pharmaceuticals, airlines and technology.
In July, Republican lawmakers in the House of Representatives penned a letter to the FTC condemning its ongoing legal battle against Microsoft and calling on the commission to drop its case against the acquisition of Activision Blizzard.
“Instead of protecting competition as Congress intended, the FTC has spent taxpayer resources seeking to block a deal that promises to expand consumer choice and insulate a dominant foreign company from competition,” the letter said.