The FTC is Suing to Block Microsoft’s Acquisition of Activision-Blizzard

The Federal Trade Commission has filed suit to block the $69 Billion acquisition of Activision Blizzard by Microsoft. The FTC alleges the deal would be anti-competitive and degrade rivals of content. This is a major setback in Microsoft’s quest to acquire game publisher Activision-Blizzard and could put the deal at risk entirely.

KEY TAKEAWAYS 

• The FTC commission voted 3-1 to seek to block the Acquisition of Activision Blizzard by Microsoft
• The FTC alleged that the deal would be anti-competitive and anti-consumer
• Microsoft seeks to acquire Activision Blizzard for a record $69 Billion  

The FTC alleges the deal would be anti-competitive and degrade rivals, including Sony of content. The FTC laid out its decision in a news update as well as in a posting as well as on Twitter. The FTC cites Microsoft’s acquisition of Zenimax Media as an example of Microsoft acquiring studios in pursuit of exclusive content. Starfield could be a good example of this. 

#BREAKING: FTC seeks to block Microsoft Corp.’s acquisition of Activision Blizzard, Inc.: https://t.co/ukewjn6MUX /1

— FTC (@FTC) December 8, 2022

According to the Washington Post, the decision was made a day after Microsoft staff met with the FTC to discuss the acquisition and the potential lawsuit. The FTC seemed unconvinced by Microsoft’s arguments. Competitors such as Sony and Google have sought to block the acquisition. 

Agency alleges that maker of Xbox would gain control of top video game franchises, enabling it to harm competition in high-performance gaming consoles and subscription services by denying or degrading rivals’ access to its popular content 

FTC’s complaint notes that the $69 billion deal, Microsoft’s largest ever and the largest ever in the video gaming industry, would enable it to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business

The agency’s complaint also points to Microsoft’s record of acquiring and using valuable gaming content to suppress competition from rival consoles, including its acquisition of ZeniMax, parent company of Bethesda Softworks (a well-known game developer)

Agency notes that Microsoft decided to make several of Bethesda’s titles including Starfield and Redfall Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles

With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, according to the FTC

FTC alleges the tech giant could also change the terms and timing of access to Activision’s content, or withhold content from competitors entirely, resulting in harm to consumers.- Federal Trade Comission 

While the FTC decision is important, this suit is not the final decision. However, the FTC commission voted 3-1 to file suit against Microsoft. This puts a bumpy road into Microsoft’s attempt to acquire Activision Blizzard. Earlier this week it was reported that the commission was split about the deal. 

While Xbox is a major player in the gaming space, they still trail Nintendo and Sony for market share. Despite this, there are concerns by competitors and the FTC over the availability of the Call of Duty franchise on Playstation. Microsoft has kept promises to Sony and the FTC that Call of Duty could continue to be available on Playstation, but no one is really convinced.

Earlier this year, Microsoft and Sony were asked to give arguments in support or against the idea that Microsoft’s acquisition would be anti-competitive. Sony responded arguing that the deal would harm them, while Microsoft argued in a 110-page report that the deal is not anti-competitive and that they are the underdog. 

Activision-Blizzard’s CEO Bobby Kotick released a statement on the FTC’s decision. 

Team,

I wanted to provide a brief update on our pending merger with Microsoft. This week the U.S. Federal Trade Commission (FTC) announced its decision to challenge the deal. This means they will file a lawsuit to block the merger, and arguments will be heard by a judge.

This sounds alarming, so I want to reinforce my confidence that this deal will close. The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge.

Thanks to the hard work by all of you every day, we’re on a strong path, bringing epic joy to players around the world with what I believe are the greatest games in the industry. At the same time, the competitive landscape is shifting, and, simply put, a combined Microsoft-ABK will be good for players, good for employees, good for competition and good for the industry. Our players want choice, and this gives them exactly that. You can read more about the specifics on those points in this update we recently shared with you.

We believe these arguments will win despite a regulatory environment focused on ideology and misconceptions about the tech industry.

Thank you for your dedication and creativity.

Bobby

Microsoft will fight this decision in the courts, and it could further delay an acquisition that was set to close in June of 2023. A trial will continue sometime into next year, but it seems uncertain now that the deal will close by this summer.