The US Federal Trade Commission (FTC) is seeking to block technology giant Microsoft’s $69-billion acquisition of Activision Blizzard, the prominent video game publisher, claiming it would harm competition in the gaming industry.
The FTC has taken legal action in an attempt to block the deal as it would “enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.”
The commission alleges that Microsoft would gain control of top video game franchises, enabling it to harm competition.
In a complaint issued yesterday (December 8), the FTC pointed to Microsoft’s record of acquiring and using gaming content to suppress competition from rival consoles, including its acquisition of ZeniMax, parent company of Bethesda Softworks, a well-known game developer.
Microsoft decided to make several of Bethesda's titles Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles.
Holly Vedova, director of the FTC’s Bureau of Competition, said: “Microsoft has already shown that it can and will withhold content from its gaming rivals.
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“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.”
The deal with Activision, agreed in January 2022, would give Microsoft ownership of major titles such as Call of Duty, Overwatch, Warcraft, and Candy Crush.
The agreement, which would be the most expensive acquisition ever for the software and technology firm, dwarfing its $26-billion takeover of LinkedIn in 2016, will see Microsoft paying $95 for each Activision Blizzard (AB) share.
The tech heavyweight said the acquisition will create the world’s third-largest esports and video game company in terms of revenue, behind Tencent and Sony.
Microsoft’s Xbox Series S and Series X are one of only two types of high-performance video game consoles. Microsoft also offers a video game content subscription service called Xbox Game Pass, as well as a cloud-based video game streaming service, according to the complaint.
Activision is among a small number of major video game developers in the world that creates and publishes high-quality video games for multiple devices, including video game consoles, PCs, and mobile devices, and has millions of monthly active users globally.
Activision currently has a strategy of offering its games on many devices regardless of producer but the FTC claims this could change if the deal is allowed to proceed.
It alleges that 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, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers.”
The commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the commission that a proceeding is in the public interest.
The issuance of the administrative complaint typically leads to a formal court hearing.
Brad Smith, the vice chair and president of Microsoft, denies that the deal will harm competition and said the company is prepared to argue its case in court.
We continue to believe that our deal to acquire Activision Blizzard will expand competition and create more opportunities for gamers and game developers.
— Brad Smith (@BradSmi) December 8, 2022
Smith wrote on Twitter: “We continue to believe that our deal to acquire Activision Blizzard will expand competition and create more opportunities for gamers and game developers.
“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.”
The vote from the FTC commissioners to issue the complaint – which was 3-1 – means Microsoft now faces significant hurdles in completing the deal. Regulators in the UK and EU are also scrutinizing the deal closely, despite Microsoft’s repeated attempts to appease regulators.
Image: David Ramos/Getty Images