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Microsoft $69bn gaming deal temporarily blocked in US

The US Federal Trade Commission (FTC) says the deal could "substantially lessen competition" in the sector.

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PHOTO | Microsoft

A judge has granted a request by regulators in the US to temporarily block Microsoft’s $69bn (£56bn) purchase of Activision Blizzard.

The court says the temporary restraining order “is necessary to maintain the status quo while the complaint is pending”.

The US Federal Trade Commission (FTC) says the deal could “substantially lessen competition” in the sector.

A two-day hearing is now due to take place from 22 June in San Francisco.

The deal to buy the Call of Duty publisher would be the largest in the history of the video games industry.

The FTC said that without a court order the deal could have been completed as early as the end of this week, despite the UK blocking the takeover in April.

Microsoft and Activision now have until 16 June to submit legal arguments to oppose a preliminary injunction and the FTC, which enforces competition law in the US, will have to reply on 20 June.

The FTC has argued that the deal would give Microsoft’s Xbox exclusive access to Activision games, leaving Nintendo consoles and Sony’s PlayStation out in the cold.

Microsoft has said the deal would benefit gamers and gaming companies, and has offered to sign a legally binding agreement with the FTC to provide Call of Duty games to rivals including Sony for a decade.

The move comes after the UK blocked the deal over concerns it would hurt competition, but the EU approved it.

Microsoft’s proposed takeover of Activision has split global regulators, and in order for the deal to go through the parties need approval from regulatory bodies in the UK, the EU and the US.

The European Commission has approved the acquisition, saying that Microsoft’s offer of 10-year free licensing deals – which promise European consumers and cloud game streaming services access to Activision’s PC and console games – mean there would be fair competition in the market.

But the UK’s Competition and Markets Authority (CMA) blocked the deal in April, saying it was concerned the takeover would offer reduced innovation and less choice for gamers.

Microsoft and Activision hit out at the CMA’s decision and said they would appeal.

Microsoft president Brad Smith said it marked the company’s “darkest day” in its four decades of working in Britain.

In response to the announcement by the FTC on Monday, Mr Smith said Microsoft welcomed the “opportunity to present our case in federal court” in its attempt to persuade US regulators to allow the deal to be completed.

“We believe accelerating the legal process in the US will ultimately bring more choice and competition to the market,” he added.

The purchase of Activision, which also makes Candy Crush, is seen to be important for Microsoft, which is trying to catch up with its main competitor Sony.

However, this attempted investment from Microsoft could be seen as a play for the future of video games, with the firm betting big on its Xbox Game Pass service, which has been described as the “Netflix of games”.

Microsoft believes the future lies in players having subscriptions to libraries and streaming games through “cloud gaming”, rather than making one-off purchases – which is the main way of accessing games at the moment.