Months after deliberating on Microsoft’s proposed acquisition of Activision Blizzard, the Federal Trade Commission on Thursday concluded that the multi-billion dollar deal violates U.S. antitrust regulations. The federal agency has moved legally against Microsoft to block the company’s biggest-ever acquisition.
Microsoft’s $68.7 billion acquisition of Activision Blizzard, announced in January this year, has run into trouble with the federal government. The FTC filed a lawsuit against Microsoft for what is not only the company’s biggest-ever acquisition but also the biggest deal in the gaming industry.
FTC said Microsoft has a history of suppressing and eliminating competition and that there is no reason why the tech giant wouldn’t do it again. “The Proposed Acquisition would continue Microsoft’s pattern of taking control of valuable gaming content,†a redacted public release of FTC’s complaintOpens a new window reads.
“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.â€
FTC voted 3-1 on Thursday in favor of suing the Redmond-based Windows maker. The case is a reminder of the U.S. Department of Justice’s litigation against Microsoft for trying to monopolize the personal computer market with Windows and bundled software.
The latest antitrust case against Microsoft has some semblance of the decades-old one, given the company is one of the two major players in the gaming console segment alongside Sony and the fact that the company is looking to gobble up one of the major game publishers and development studios.
Activision Blizzard owns some of the biggest game franchises. This includes Call of Duty, Warcraft, Candy Crush, Diablo, Overwatch, Tony Hawk’s, etc., which collectively have 400 million global players.
Activision Blizzard earned $8.8 billion in 2021 and featured consistently in the top 10 biggest gaming companies behind Microsoft ($16.3 billion), Sony ($24.9 billion), Nintendo ($15.3 billion), and Tencent ($13.9 billion).
FTC cited Microsoft’s decision to make several of Bethesda Softworks’ games (Starfield and Redfall) exclusive to its own console despite assuring European regulators that it wouldn’t as an example of the company’s previous anticompetitive conduct in the space. Microsoft acquired Bethesda Softworks’ parent company ZeniMax in 2021.
The Lina Khan-headed FTC fears Microsoft will cease releasing games it would eventually own if it ends up acquiring Activision Blizzard on consoles other than Xbox. “Microsoft has already shown that it can and will withhold content from its gaming rivals,†said Holly Vedova, FTC’s Bureau of Competition director.
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“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.â€
In response, Microsoft president Brad Smith tweeted:
We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believe in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present it in court.
— Brad Smith (@BradSmi) December 8, 2022Opens a new window
This week, Microsoft Gaming president Phil Spencer notified gamers that the company has agreed to a 10-year commitment to bring Call of Duty to Nintendo consoles. Smith also pointed out that Microsoft is eager to “sit down and talk†to “hammer out a ten-year deal for PlayStation.†Microsoft previously told the New York Times that it offered Sony a ten-year deal to keep Call of Duty on PlayStation.
Sony has been the most vocal opponent of the Microsoft-Activision Blizzard deal. “It’s as excited about this deal as Blockbuster was about the rise of Netflix,†Smith opined in a Wall Street Journal piece.
Activision Blizzard CEO Bobby Kotick expressed confidence that the deal would sail through, despite a regulatory environment “focused on ideology and misconceptions about the tech industry.â€
“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,†Kotick wrote.
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