The federal antitrust lawsuit, filed in San Francisco, comes less than two weeks after the Federal Trade Commission sued to block the merger between one of the world’s top video game publishers and the manufacturer of the Xbox console. The new suit names Microsoft, but not Activision, as a defendant.
Like the FTC, the gamers are seeking a court order prohibiting the companies from consummating the transaction. Their complaint cites concerns that the merger would give Microsoft enough clout over multiple levels of the gaming industry “to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition.”
“Microsoft already controls one of the industry’s most popular and largest video game ecosystems,” the suit says. “The proposed acquisition would give Microsoft an unrivaled position in the gaming industry, leaving it with the greatest number of must-have games and iconic franchises.”
A Microsoft spokesperson defended the transaction Tuesday in a statement to Bloomberg Law.
“This deal will expand competition and create more opportunities for gamers and game developers as we seek to bring more games to more people,” the statement said.
According to the complaint, the planned merger would give Microsoft outsized power in the industry’s overlapping product markets, such as console, PC, cloud-based, and mobile gaming. The tech giant would also allegedly gain an edge in markets covering top-tier “AAA” games, subscription services, and consoles themselves.
The gaming divisions at both companies are already the result of past major mergers reflecting “a dramatic wave of consolidation” following a “long history of concentration” in gaming markets that continues to threaten the sector’s competitive landscape, the suit says.
The merger would also allegedly combine two of the few large companies currently competing for workers with the “specialized talent” to make video games. That would reduce employee mobility and leverage at exactly the wrong time, when Activision is “engulfed in lawsuits” over its toxic culture of gender discrimination and sexual harassment, according to the complaint.
That allegation echoes an unrelated shareholder case challenging the deal from a different angle. The investor lawsuit—filed by a Swedish state-run pension fund holding Activision shares—accuses the companies of engineering an underpriced merger to exploit Activision’s workplace scandals and protect its embattled CEO.
The antitrust lawsuit was filed in the US District Court for the Northern District of California.
Cause of Action: Section 7 of the Clayton Act.
Relief: An injunction against the merger, invalidation of the deal’s termination fee provisions, costs, and fees.
Attorneys: The gamers are represented by Alioto Law Firm, Alioto Legal, and Joseph Saveri Law Firm LLP.
The case is DeMartini v. Microsoft Corp., N.D. Cal., No. 22-cv-8991, complaint filed 12/20/22.
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