FTC Sues To Block Microsoft’s Activision Blizzard Deal!

FTC Sues To Block Microsoft’s Activision Blizzard Deal: The $69 billion acquisition of Activision Blizzard by Microsoft, the company behind the popular games Call of Duty and Candy Crush, was challenged on Thursday by the Federal Trade Commission because it would undermine competition in the video game market.

The case represents the FTC’s most significant action to date under Chair Lina Khan to limit the influence of the biggest internet giants in the world. Additionally, it is a significant setback for Microsoft, which has positioned itself as a type of white knight on antitrust matters in the tech industry after having gone through its own arduous regulatory antitrust battles around the world more than 20 years ago.

A day after Microsoft executives and the company’s lawyers met with the FTC’s three Democratic commissioners in a last-ditch effort to defend the deal, according to a person familiar with the discussions who spoke on the condition of anonymity to discuss a sensitive matter, the lawsuit was filed in the FTC’s internal administrative court.

Since the matter is currently underway in the FTC’s internal court, an administrative judge will preside over the trial. The commissioners will then hear an appeal after the trial, but they are currently separated from the staff lawyers handling the dispute.

All three of the Democratic members of the FTC—Lina Khan, Alvaro Bedoya, and Rebecca Kelly Slaughter—voted in favor of filing the complaint, while Republican Christine S. Wilson abstained. The result was 3-1.

Whether buying Activision would give Microsoft an unfair advantage in the video game market is at the heart of the FTC’s worries. The PlayStation console from Sony Interactive Entertainment, which is the market leader, is ahead of Microsoft’s Xbox.

Sony, on the other hand, has emerged as the deal’s main foe, warning the FTC and international regulators that Sony would suffer grave disadvantages if Microsoft made popular titles like Call of Duty exclusive to its platforms.

The FTC claimed on Thursday that Microsoft has a history of acquiring gaming companies and locking down key titles. The agency cited the purchase of Bethesda Softworks’ parent company, ZeniMax, and the subsequent decision to make several games, including “Starfield” and “Redfall,” Microsoft exclusives “despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles.”

Microsoft’s president, Brad Smith, stated that although the company “believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court,” the company “has been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC.”

Activision Blizzard CEO Bobby Kotick expressed optimism in a letter to staff members on Thursday, saying that even though the news of the lawsuit “sounds scary,” he is still convinced “this merger will close.” The claim that this agreement is anti-competitive is unfounded, and Kotick continued, “We believe we’ll prevail in this dispute.”

Microsoft President Brad Smith restated his recent commitment to give Sony access to the game for the next 10 years in a Wall Street Journal op-ed on Monday. Microsoft has promised to keep making Call of Duty available on Sony’s PlayStation console. Sony has yet to openly respond and has not accepted the offer.

Microsoft announced on Tuesday that it has secured similar 10-year agreements with Nintendo and Valve, the owner of the Steam video game distribution service. Nintendo does not currently have Call of Duty, but Steam does. The agreements depend on Microsoft completing the Activision transaction.

Microsoft has stated time and time again that it would not be profitable to remove Call of Duty from Sony’s market-dominating PlayStation platform. The FTC is worried about whether Microsoft will use the transaction to control the emerging cloud gaming business and subscription gaming services, which go beyond actual consoles.

The business’s Xbox Game Pass is already the most popular subscription offering on the market. According to two people with knowledge of the review, the agency’s worries go beyond Call of Duty and include the possibility that Microsoft could use upcoming, unannounced games to expand its gaming business.

Corporate monopolies have had free rein to hike prices and harm workers, but now the Biden admin is committed to promoting competition.

I urged @linakhanFTC to scrutinize @Microsoft's proposed merger with @Activision & welcome this FTC action to block it. https://t.co/hX8PYQq6VB

— Elizabeth Warren (@SenWarren) December 8, 2022

The FTC claimed that if Microsoft took control of Activision’s popular games, it would have “the means and motive to damage competition.” Microsoft might alter prices, alter how a game performs on competing consoles—possibly making it worse—or withhold material “from competitors completely, harming consumers.”

The corporations face other obstacles besides the FTC. A preliminary U.K. decision is likely in late January, and a final U.K. decision is scheduled in late March. The EU and U.K. are both currently conducting extensive investigations into the deal.

We continue to believe that our deal to acquire Activision Blizzard will expand competition and create more opportunities for gamers and game developers.

— Brad Smith (@BradSmi) December 8, 2022

The EU has until the end of March to complete its investigation. The conclusion of the European investigations won’t necessarily have an impact on the FTC’s case, according to an official who spoke to the media on condition of anonymity.

The official explained that the commission’s decision to reject a complaint indicated that they thought there were sufficient grounds to move forward at this time. Nothing compels American regulators to follow non-American ones in step.

Microsoft has entered into a 10-year commitment to bring Call of Duty to @Nintendo following the merger of Microsoft and Activision Blizzard King.  Microsoft is committed to helping bring more games to more people – however they choose to play. @ATVI_AB

— Phil Spencer (@XboxP3) December 7, 2022

We, however, have our statutes. The representative added that the FTC’s complaint expressly addresses the geographic market in the United States and “damage that potentially occurs to U.S. consumers.”

The FTC is currently heavily involved in the gaming industry, and a trial in its action to stop Meta Platforms’ acquisition of Within—the company that makes the virtual reality fitness game Supernatural—begins on Thursday.

“.. Think about how much better it is to stream a movie from your couch than drive to Blockbuster. We want to bring the same sort of innovation to the videogame industry.”

⁦@BradSmi⁩ ⁦@WSJopinion⁩ $MSFT $ATVI https://t.co/HZKOMgXzK4

— Carl Quintanilla (@carlquintanilla) December 6, 2022

And the organization is currently pursuing a complex antitrust action against Meta. The FTC and its congressional supporters have long been concerned that the agency lacks the resources to compete head-to-head with the biggest internet corporations, and now it’s engaged in conflict with yet another.

These corporations are extremely affluent. The FTC official claimed that they employ legions of attorneys. “At the same time, I’d say we’re fully prepared to argue this case in court. The FTC is prepared to pursue this case and has what I believe to be the best antitrust fighting force in the world.

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