“A preliminary injunction is necessary to… prevent interim harm” while the FTC determines whether “the proposed acquisition violates US antitrust law,” the regulator said in the filing.
Tuesday’s ruling bars Microsoft from moving forward with the deal before the court decides whether to issue a preliminary injunction sought by regulators.
In requesting the preliminary injunction at the Northern California District Court, the US government sought to prevent the companies from finalizing the deal before a July 18 deadline.
An FTC hearing is set for August to argue the merits of the deal, and a restraining order would block the accord before that process has run its course.
The California judge would need to agree to stop the deal after hearing arguments by the FTC on why the buyout is illegal and from Microsoft on why it should go ahead.
“We welcome the opportunity to present our case in federal court,” Microsoft President Brad Smith said on Monday.
“We believe accelerating the legal process in the US will ultimately bring more choice and competition to the market,” he added.
Xbox-owner Microsoft launched a bid for Activision Blizzard early last year, seeking to establish the world’s third biggest gaming firm by revenue after China’s Tencent and Japan’s PlayStation maker Sony.
While the European Union has greenlit the deal, Britain’s Competition and Markets Authority blocked it in April, arguing it would harm competition in cloud gaming.
The FTC in December sued to block the transaction with Activision Blizzard, maker of the popular “Call of Duty” title, over concerns that it would stifle competition.
The regulator is led by Lina Khan, an antitrust academic who had been an advocate of breaking up the biggest tech firms before she was nominated by President Joe Biden to the job in 2021.
Khan has accused Meta, Facebook’s parent company, of stifling competition by buying up startups and the FTC has carried out investigations of Amazon.
The US Department of Justice, meanwhile, has filed lawsuits arguing that Google has committed antitrust violations in online search as well as in advertising.