Lina Khan, the chairwoman of the Federal Trade Commission, has pledged to usher in a new era of abuse of trust by American giants, recently saying that the agency plans to “enforce antitrust laws to ensure maximum efficiency.”

Now Ms Khan has staked that ambitious program on a case that could be very difficult for the agency to win.

The FTC on Thursday filed a lawsuit to block Microsoft’s $69 billion acquisition of video game maker Activision, the biggest consumer tech deal in two decades. The action punctuated Ms Khan’s statements about harnessing corporate power and was the boldest in a recent string of lawsuits the agency has brought to prevent other smaller deals in the name of competition.

But Ms. Khan and the FTC face hurdles in trying to shut down the Microsoft-Activision deal, experts said. This is because the courts have been skeptical of challenges to so-called vertical mergers, where the two companies are not in direct competition. In this case, Microsoft is best known in gaming as the maker of the Xbox console, while Activision is a major publisher of hit titles such as Call of Duty.

Additionally, Microsoft made a number of concessions to lessen regulatory concerns over the Activision purchase – such as the promise that Call of Duty would be available on Sony’s PlayStation and Nintendo platforms, not just Xbox – which some judges might find persuasive.

“It’s undeniably a tough trial for the commission because vertical challenges usually have an uphill battle,” said Bill Baer, ​​who led the Justice Department’s antitrust division during the Obama administration and represented Sony. in private practice.

The case stands as a test of Ms. Khan’s belief that the FTC must become more aggressive in controlling the power of the giants of the modern economy, including the biggest tech companies. Appointed to head the agency by President Biden, she has signaled she wants to pursue more lawsuits — instead of settling with companies — to push the boundaries of antitrust law and return to the kind of trustbusting never seen before. since the last century.

Since Ms. Khan took over the FTC in June last year, the agency has used new or little-used arguments to challenge the deals. He sued to block the merger between chipmakers Nvidia and Arm, another deal in which the companies were not direct competitors. In July, the agency filed a lawsuit to stop Facebook’s parent company Meta from buying virtual reality startup Within, in a case that hinges on an uncommon argument that the deal would harm to compete in a market that has not yet developed.

Microsoft has pledged to fight the FTC’s lawsuit over the Activision purchase. On Thursday, Microsoft Chairman Brad Smith said the company has “full confidence in our case and welcomes the opportunity to present it in court.” On Friday, Microsoft pointed to previous statements that it believes the deal will broaden competition and create more opportunities for gamers and game developers.

An FTC spokesperson declined to comment on the matter.

Regulators have traditionally focused on difficult mergers that combine two direct competitors. When they have sued vertical mergers, their record is mixed.

The biggest and deadliest recent battle over a vertical merger took place in 2017, when the Justice Department tried to block AT&T’s $85.4 billion purchase of Time Warner. A federal judge eventually cleared the deal, saying he was not convinced the combination would harm competition in telecommunications and media.

This year, a judge ruled against the FTC’s attempt to block a gene sequencing company from buying the maker of a cancer blood test, saying the evidence had failed to prove the company gene sequencing company would have a post-acquisition incentive to harm its competitors. blood test product.

But Ms Khan, along with her Justice Department counterpart, has led an effort to rewrite the guidelines for assessing such deals.

The FTC primarily based its case against Microsoft’s Activision deal on the idea that Xbox and PlayStation consoles compete in a league of their own, not other video game devices like the Nintendo Switch. Barry Nigro, who worked in the Justice Department’s antitrust division during the Obama administration, said the courts would seriously consider whether that definition was correct to decide the case.

In its complaint, the FTC argued that games made by Activision were “extremely important” to the success of video game consoles, such that Microsoft would have the ability and incentive to use its control over these titles to drive them away. competitors or degrade their quality. .

No game is more important to the case than first-person shooter Call of Duty, which the agency called “one of the most successful console game franchises of all time.” . Sony said if Microsoft got its hands on Call of Duty, it could keep the game off PlayStation, pushing gamers to Xbox.

Microsoft has repeatedly said it would make no sense to pull Call of Duty from PlayStation, where most gamers play the game. This week, Microsoft signed a 10-year deal to bring the game to Nintendo Switch, and said it offered Sony a similar deal.

But the FTC rejected Microsoft’s promises. He pointed to a $7.5 billion deal Microsoft struck last year to buy ZeniMax, the parent company of eight game studios that make hit franchises like The Elder Scrolls, Doom and Fallout.

The agency wrote in its complaint that Microsoft had “assured” regulators in Europe reviewing the ZeniMax deal that it would have no incentive to withhold ZeniMax titles from rival consoles. But Microsoft later announced that major new games from ZeniMax studios would only be released on its Xbox and Windows computers.

This should “cast more suspicion” on Microsoft’s statements regarding keeping Call of Duty available on PlayStation, the agency said in its lawsuit.

Microsoft said these new ZeniMax games cannot be compared to an existing franchise like Call of Duty. He said the FTC is misrepresenting what happened because the company made no commitment to the European Commission, pointing to European documents in which it said it would decide how to release games on a “case-by-case basis”. case”.

In meetings with the agency and commissioners on Wednesday, Microsoft offered to make enforceable and binding commitments to keep Call of Duty on PlayStation, a person with direct knowledge of the conversations said. But the commissioners didn’t seem interested in agreeing to a settlement, the person said.

The FTC declined to comment on conversations it had with Microsoft before the trial.

These types of deals have fallen out of favor with regulators like Ms. Khan. She said the promises companies make to regulators are rarely enforced and don’t address the fundamental problems of companies growing big and using their power to harm competition.

In some recent antitrust cases, judges have cited settlement offers as a reason for allowing mergers to proceed despite regulators’ objections. “The courts have been surprisingly attentive to the kinds of things Microsoft is offering here,” said Daniel Francis, an assistant professor of law at New York University and a former FTC official.

The FTC’s complaint said the first hearing in the case would be in August.

Kellen Browning contributed report.