What Will Activision Blizzard Clos? The FTC, CMA, and US Obstructions to Microsoft’s 2022 Acquisition
Outside of the European Union, Microsoft’s Activision Blizzard acquisition has also faced opposition from UK and US regulators. The USA’s Federal Trade Commission filed a legal challenge to block the acquisition in early December 2022, arguing that it would “enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.” Meanwhile, the UK’s Competition and Markets Authority said the deal “could result in higher prices, fewer choices, or less innovation for UK gamers,” in provisional filings announced earlier this month.
“Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets,” said Holly Vedova, director of the FTC’s Bureau of Competition, in a statement.
In a letter to Activision Blizzard employees, CEO Bobby Kotick told staff that he wants to “reinforce my confidence” that the acquisition will close. He said that the allegation that this deal is anti-competitive doesn’t align with the facts. The company posted an internal email from its senior VP of litigation, regulatory, and public policy law detailing its position on the deal.
Microsoft is still hoping to get this deal closed by the summer with its allies helping to sway regulators. The timelines will now be dictated by the European Commission, the FTC and the CMA. That doesn’t mean Microsoft isn’t willing to fight this all the way, though. Microsoft’s Brad Smith has already responded to the FTC warning of court action in the US. “While we believe in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present it in court,” said Smith last year.
Officials in the United Kingdom and the European Union have also scrutinized the deal as potentially anticompetitive. The FTC’s attempt to block the deal was the first of its kind.
Bringing Call of Duty to the European Commission: A Showdown on Microsoft’s Plan to End the FTC-Sky-Limit
There is a 10-year deal on the table if Sony agrees to it. Jim Ryan had previously called Microsoft offer to keep Call of Duty on Sony consoles “inadequate on many levels.”
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.”
As well as Call of Duty, Smith’s tweet alludes to “Xbox games” more generally, though it doesn’t offer specifics on what franchises these may come from.
Microsoft and Sony’s gaming chiefs are both preparing to meet with EU regulators today in a showdown over Microsoft’s proposed acquisition of Activision Blizzard. The closed-door hearing will see Phil Spencer and other Microsoft executives argue for the $68.7 billion deal to go ahead, with Jim Ryan of Sony speaking out against it.
“We’re more than willing, given our strategy, to address the concerns that others have, whether it’s by contracts, like we did with Nintendo this morning, or whether it’s by regulatory undertakings, as we’ve consistently been open to addressing,” said Smith, in a meeting attended by Bloomberg.
The suggestion of a partial sell off of the Call of Duty business is one that seems to be favored by the CMA which is open to behavioral remedies that involve deals for Call of Duty. The meeting today will discuss the European Commission’s main concerns as well as any potential remedies Microsoft might have to consider before the April 11th deadline.
“The nature and extent of SIE’s content-licensing agreements are relevant to the Complaint’s allegations of exclusivity arrangements between video game console developers and video game developers and publishers,” said Judge Chappell.
Judge Chappell granted Sony’s request to limit the time it takes for document requests to be made in 2020 instead of the excessive amount Microsoft had been trying to get information on.
The FTC case could potentially open the games industry up to more scrutiny, because details on exclusive deals are usually kept from the public. The last time we saw similar details revealed by a court case was Epic Games vs. Apple in 2021. That case showed how Microsoft had explored reducing its Xbox store cut to shake up console gaming, how Sony had implemented cross-play platform fees, and that Fortnite was a PS4 cash cow.
We are months away from seeing new information in the FTC case, with an evidentiary hearing scheduled for August 2nd.