The FTC is looking to block Microsoft’s groundbreaking acquisition of Activision Blizzard

Washington
CNN
–

The Federal Trade Commission on Thursday filed a lawsuit to block Microsoft’s $69 billion acquisition of Activision Blizzard, challenging one of the largest technology acquisitions in history.

administrative A complaint was filed Thursday by the FTC The mega deal, which would make Microsoft the world’s third-largest video game publisher, would allegedly give Microsoft “both the means and the motive to hurt competition” – claiming it could negatively affect video game prices as well as game quality and player experiences on consoles and services. Games, according to an agency release.

“We continue to believe that this transaction will broaden competition and create more opportunities for gamers and game developers,” Microsoft President Brad Smith said in a statement Thursday. “We have been committed from day one to address competition concerns, including by submitting proposed concessions earlier this week to the Federal Trade Commission. While we believed in giving peace a chance, we have full confidence in our cause and welcome the opportunity to present our case in court.”

In an email sent to employees and provided to CNN, Activision CEO Bobby Kotick said the FTC lawsuit may appear “disturbing” but he remains confident the deal is closed. “The allegation that this transaction is anti-competitive is not consistent with the facts, and we believe we will prevail in this challenge,” he said.

The merger challenge in the United States reflects the biggest setback yet for Microsoft, as it aggressively courted regulators around the world in hopes of persuading them to bless the deal. It also represents the FTC’s biggest challenge to the tech industry since it sued to break up Facebook’s owner meta in 2020, underscoring US officials’ loud promises of a tough antitrust enforcement agenda.

“This is the boldest step the Biden administration has taken yet to police mergers involving big tech companies and to broaden merger enforcement,” said William Kovacic, a George Washington University law professor and former FTC chair. “More than anything else they’ve done, this exemplifies their commitment to being tough on mergers.”

The case could also mark a turning point for how regulators and courts review proposed deals, at a time when US antitrust enforcers have knowingly raised tough cases to test the law and keep up with advances in technology.

Microsoft’s proposed deal would give it control of major video game franchises, including “Call of Duty,” “World of Warcraft,” and more. The FTC said that could give it enormous leverage over the future of a multi-billion-dollar industry.

“Today we seek to prevent Microsoft from taking control of a leading independent game studio and using it to harm competition in dynamic and fast-growing game markets,” Holly Vidova, director of the Federal Trade Commission’s Office of Competition, said in a statement.

UK and EU officials have also scrutinized the deal as potentially anti-competitive. But the FTC’s complaint marks the first attempt by the antitrust regulator to block the deal outright.

The Federal Trade Commission said Microsoft could use its ownership of Activision titles to raise prices, or to try to funnel gamers over to gaming platforms it controls, such as Xbox or Windows. The deal could also affect the emerging market for cloud-based gaming services, the FTC said, which Microsoft is participating in through its subscription service, Xbox Game Pass.

In recent days, Microsoft has announced a slew of partnerships seemingly aimed at deflecting allegations that it will withhold gaming content from competitors. Microsoft said this week that it has reached a 10-year agreement with Nintendo that guarantees it will have access to Call of Duty for the foreseeable future.

In the Wall Street Journal on Monday, Microsoft’s Smith said an FTC lawsuit to block an Activision deal would be a “huge mistake” and added that the acquisition would allow Microsoft to invent new features like the ability for consumers to play the same thing. on multiple devices, just like with streaming TV shows or music.

Months ago, in February, Microsoft made an 11-point pledge relating to all of its app marketplaces and games business. The list included a promise, which would cover Activision’s proposed deal, not to give preferential treatment to its games published in the digital marketplaces it operates.

The FTC complaint uses an internal administrative process that does not involve filing a complaint with a federal court. That could give the FTC a theoretical advantage, Kovacic said, since an FTC administrative law judge might be tempted to give regulators the benefit of the doubt. But he added that the FTC still has to muster evidence and convincing arguments to win the case, which could take years to conclude.