Microsoft Corp and Activision Blizzard Inc are in a legal battle with the U.S. Federal Trade Commission (FTC) over their proposed $69 billion merger, which would create one of the largest gaming companies in the world.
The FTC has sued to block the deal, arguing that it would harm competition and consumers in the video game industry. The case is being heard by Judge Jacqueline Scott Corley in San Francisco, who will decide whether to grant a preliminary injunction to stop the deal from closing until the FTC’s in-house court rules on its merits.
The FTC’s Arguments
The FTC claims that the merger would give Microsoft exclusive access to Activision’s famous games, such as “Call of Duty,” one of the best-selling games ever. This would leave Microsoft’s rivals, such as Sony and Nintendo, out in the cold, as they would lose access to these games or face higher licensing fees.
The FTC also alleges that the merger would reduce innovation and choice for gamers, as Microsoft would have less incentive to invest in new games or improve its existing ones. The FTC says the deal would affect three related markets: consoles, subscription services, and cloud gaming.
Microsoft’s Defense
Microsoft denies that the merger would harm competition or consumers, and argues that the video game industry is dynamic and diverse, with many players and platforms. Microsoft says it would license Activision’s games broadly to other platforms, including Sony’s PlayStation and Nintendo’s Switch, and that it has no economic or strategic reason to withhold them.
Microsoft also contends that the merger would benefit gamers, bringing more games to people, primarily through its subscription service Xbox Game Pass and its cloud gaming platform xCloud. Microsoft says the deal would foster innovation and creativity, supporting Activision’s developers and studios.
The battle between the FTC and Microsoft has come to a close:-
FTC v. Microsoft is over, but who won? In the dispute’s final hours, the FTC’s cracks really began to show. My summary here: https://t.co/2aHKHYvB71
— Tom Warren (@tomwarren) June 30, 2023
The Legal Outcome
The judge will have to weigh the evidence and arguments from both sides and decide whether the FTC has shown a likelihood of success on the merits of its case and whether it would suffer irreparable harm if the deal goes through.
The judge will also consider both parties’ public interest and the balance of hardships. The decision is expected to come before July 18, the contractual deadline for the deal to close.
If the judge grants the injunction, the value will be held until the FTC’s in-house court rules. If the judge denies the request, the contract will likely proceed, unless the FTC appeals or seeks other remedies.
If you are interested, we have provided a lot of Microsoft-related stuff, which you may look at if you want to:-
- Microsoft Appeals UK Competition Watchdog’s Decision on Activision Deal
- Microsoft Appeals Britain Decision on Activision Blizzard Acquisition
The Implications
The case is a test for Microsoft and the FTC, as they face each other in court for the first time in over two decades. For Microsoft, it is a chance to prove that it is not a dominant player in the tech industry and can grow through acquisitions without violating antitrust laws.
For the FTC, it is an opportunity to show that it can challenge big tech deals effectively and protect consumers and competition in a fast-changing market. The case outcome will also significantly impact the video game industry, shaping its future landscape and dynamics.