The commission voted 3-1 in favor of the complaint, which was filed in its in-house court. Regulators said Microsoft’s ownership of Activision could hurt other players in the $200 billion gaming market by limiting rivals’ access to the company’s biggest games. The transaction would turn Microsoft into the No. 3 gaming company, behind
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said
An FTC official, speaking anonymously to discuss the complaint, said the agency was concerned that Microsoft could deny access, delay availability or degrade the quality of Activision Blizzard’s most popular titles to rival platforms. Those concerns relate not only to consoles, but also to subscription services and cloud-based gaming, two markets still in development, the official said.
Microsoft’s proposed Activision Blizzard deal is the company’s largest ever and one of the 30 biggest acquisitions of all time. The transaction would give Microsoft some of the most popular video game franchises, such as Call of Duty and World of Warcraft. The Xbox maker already owns the Halo franchise and Minecraft virtual-world-building game.
“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” said Microsoft President
“We have complete confidence in our case and welcome the opportunity to present our case in court,” Smith added.
Activision shares fell 1.5% to $74.76 after falling as much as 3.9% earlier. Microsoft shares rose 1.2% to $247.40.
In a letter, Activision Blizzard Chief Executive Officer
“The allegations that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” Kotick said, adding that the combined company would be “good for players,” despite a regulatory environment that he says is “focused on ideology and misconceptions about the tech industry.”
The FTC scheduled its in-house trial to begin on August 2, 2023. In prior merger challenges in the agency’s in-house court, the judge issued an initial decision between seven and 12 months after the trial began, said
Microsoft and Activision have said the deal will close by June 30, the end of Microsoft’s current fiscal year. The FTC would need to separately sue in federal court if it wants Microsoft to put off closing the deal until after the trial is over.
“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 agency said in its complaint. “This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”
In its release announcing the lawsuit, the FTC cited Microsoft’s decision to make two upcoming titles by newly acquired unit Bethesda Softworks exclusive to Microsoft’s platforms despite assurances the company gave to EU regulators that it had no incentive to withhold games from rival consoles.
The lawsuit is part of an effort by FTC Chair
Although Brazilian antitrust officials cleared the Microsoft-Activision deal in October, other competition regulators, including the UK and the European Union, have also raised concerns. Those two bodies aren’t set to issue decisions on the deal until next year.
Microsoft on Tuesday announced a deal to bring Call of Duty to the Steam PC gaming platform and Nintendo Co. consoles. The company said it’s also offered a proposal that would keep Call of Duty on Sony’s PlayStation for the next 10 years, but the Japanese electronics giant has so far rebuffed efforts to work out a resolution. Sony has fiercely objected to the Activision acquisition, primarily because of concerns the US tech giant could make content like Call of Duty exclusive to its own gaming services.
“There’s been one game industry participant that’s really been raising all the objections, and that’s Sony, and they’ve been fairly public about the things that don’t meet their expectations,” Xbox chief Phil Spencer said in an interview Tuesday. “From where we sit, it’s clear they’re spending more time with the regulators than they are with us to try and get this deal done.”
Joost van Dreunen, a video games expert who teaches at New York University’s Stern School of Business, said antitrust authorities have become skeptical of pledges, particularly by the tech platforms, about future behavior. Van Dreunen provided comments on the deal to UK competition officials.
“I don’t think it’s ultimately enough for the FTC to go on,” van Dreunen said of Microsoft’s pledge.
The Redmond, Washington, tech giant sought to placate possible labor concerns about the merger by reaching an agreement with the Communications Workers of America, which also represents employees in the gaming industry. In the pact, Microsoft pledged to take a neutral approach if employees express interest in joining a union.
The company also said it would stop using noncompete or confidentiality clauses to bar workers from talking about discrimination or harassment as part of a settlement or separation deal. The FTC has publicly raised concerns about the use of noncompetes and the impact of mergers on labor conditions.
(Updates with details on trial schedule from 11th paragraph.)
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