FTC Challenge to Microsoft’s $69 billion Takeover of Activision Blizzard: “Get The Facts: How Microsoft is Committed to Growing Gaming Communities”
The Federal Trade Commission said Thursday it is suing to block Microsoft’s planned $69 billion takeover of video game company Activision Blizzard, saying it could suppress competitors to its Xbox game consoles and its growing games subscription business.
According to Microsoft, the FTC was trying to block the deal because it would hamper competition in the gaming industry.
Bobby Kotick, the CEO of Activision, told employees in an email that the FTC suit may sound “alarming” but he remains confident that the deal will close. He stated that the allegations that the deal is anti-competitive doesn’t match the facts and they will win the challenge.
The biggest blow yet for Microsoft was the merger challenge in the US, as it has aggressively courted regulators all over the world in order to get them to approve the deal. The FTC has been trying to break up Facebook-owner Meta since it was sued in 2020 and it marks its most significant challenge to date.
The deal has been scrutinized by officials in the United Kingdom and the European Union. The FTC is the first antitrust agency to attempt to block the deal.
In February of this year, Microsoft made an 11-point pledge about its app marketplaces and gaming business. The list included a promise, which would cover the proposed Activision deal, not to give preferential treatment to its own published games on digital marketplaces it runs.
The company’s corporate vice president of communications, Frank X. Shaw, also tweeted a link to a document titled: “Get The Facts: How Microsoft is Committed to Growing Gaming Communities.”
Microsoft has also accused Sony of paying developers to keep their content off of its Xbox Game Pass service, and Sony has even argued that Microsoft’s Activision Blizzard acquisition could “hurt developers and lead to price rises.”
The FTC’s First Proposed Action: Protecting Activision from Mergers In A Closed-door Meeting Including a Fifth Seat
The FTC voted to issue a complaint after a closed-door meeting, with the three Democratic Commissioners Voting in favor and one Republican voting against. A fifth seat on the panel is vacant after another Republican left earlier this year.
Smith said they have complete faith in their case and welcome the chance to present it in court.
The FTC’s challenge — which is being filed in an administrative court — could be a test case for President Joe Biden’s mandate to scrutinize big tech mergers.
Antitrust regulators under Biden “have staked out the view that for decades merger policy has been too weak and they’ve said, repeatedly, ‘We’re changing that,’” said William Kovacic, a former chair of the FTC.
The goal is to “not allow dodgy deals and not accept weak settlements,” said Kovacic, who was a Republican commissioner appointed in 2006 by then-President George W. Bush. He thinks that blocking this deal could lead to a legal challenge from Microsoft that the company has a chance of winning.
“It’s evident that the company has been making a number of concessions,” he said. “If the FTC turns down Microsoft’s commitments, Microsoft would likely raise them in court and say the FTC is being incorrigibly stubborn about this.”
In a complaint on Dec. 8, the FTC said its concern was that Activision’s popular games, including “World of Warcraft” and “Diablo,” potentially would stop being offered on devices that rival Microsoft’s Xbox. It set a hearing before an administrative law judge for August 2023.
The End of the Age: The Case against a Merger of Penguin Random House, Simon & Schuster, and The Elder Scrolls VI
The Biden administration has taken a more aggressive approach to antitrust enforcement. The US Department of Justice recently stopped a $2.2 billion merger of Penguin Random House, the world’s largest book publisher, and smaller US rival Simon & Schuster.
Those games aren’t named, though Microsoft has basically announced that The Elder Scrolls VI will only be available on its platforms, and confirmed Starfield will be exclusive.
There is no sensible, legitimate reason for our transaction to be prevented from closing. Our industry has very little barriers to entry. More devices have been available before enabling players to play a wide range of games. Developers are able to use engines and tools of their choice. The breadth of distribution options for games has never been more widespread. We believe we will prevail on the merits of the case.
We are steadfast in our commitment to creative solutions with regulators, that will protect competition, consumers, and workers in the tech sector. As we’ve learned from our lawsuits in the past, the door never closes on the opportunity to find an agreement that can benefit everyone.