Microsoft preps to battle US over Activision Blizzard deal
Microsoft is headed for a battle with the Federal Trade Commission over whether the U.S. will block the tech giant’s planned takeover of video game company Activision Blizzard.
Last week, Microsoft filed a formal challenge to the FTC lawsuit’s declaring the $68.7 billion deal an illegal acquisition that should be stopped.
After years of avoiding the political backlash that has been directed at big tech peers such as Amazon and Google, the software giant appears to be on a collision course with U.S. regulators emboldened by President Joe Biden’s push to get tough on anti-competitive behavior.
The FTC claims the merger could violate antitrust laws by suppressing competitors to Microsoft’s Xbox game console and its growing Xbox Game Pass subscription business.
At the center of the dispute is Microsoft’s rivalry with PlayStation-maker Sony to secure popular Activision Blizzard franchises like the military shooter game “Call of Duty.”
Microsoft’s response to the FTC tries to downplay Xbox’s role in the industry, describing itself as the “third-place manufacturer of gaming consoles” behind Sony and Nintendo, and one of just many publishers of popular video games with “next to no presence in mobile gaming,” where it is trying to make gains.
The dispute could be a difficult test case for Biden-appointed FTC Chair Lina Khan, who has sought to strengthen enforcement of antitrust rules. The FTC voted 3-1 in December to issue the complaint seeking to block the deal, with Khan and the two other Democratic commissioners voting in favor and the sole Republican voting against.
The FTC’s complaint points to Microsoft’s 2021 acquisition of game developer Bethesda Softworks and its parent company ZeniMax, as an example of where Microsoft is making some upcoming game titles exclusive to Xbox despite assuring European regulators it had no intention to do so.
Microsoft in the challenge filed last week objected to the FTC’s characterization, saying it made clear to European regulators it would “approach exclusivity for future game titles on a case-by-case basis.”
The FTC’s suit describes top-selling franchises like “Call of Duty” as important because they develop a base of loyal users attached to their preferred console or streaming service.
“With control of Activision’s content, Microsoft would have the ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition — including competition on product quality, price, and innovation,” the FTC lawsuit says. “This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”
Microsoft signaled that it will vigorously fight the case in court with a team led by high-profile corporate attorney Beth Wilkinson, while also leaving open the possibility of a settlement.
“We remain committed to creative solutions with regulators that will protect competition, consumers, and workers in the tech sector,” Microsoft President Brad Smith said.