US Moves To Block Microsoft’s Activision Purchase
Biden administration on Thursday makes its move to block Microsoft’s $69bn acquisition of gaming giant Activision Blizzard
Microsoft executives are confronting a new regulatory challenge in their quest to complete the $68.7 billion acquisition of Activision Blizzard.
The British regulator, the Competition and Market Authority (CMA) was the first to signal its regulatory concerns about the deal. It was followed months later by European competition regulators.
Now in the United States, the US Biden administration has moved to block Microsoft’s Activision purchase.
FTC complaint
It comes as Microsoft seeks to assuage regulatory and competition concerns.
Earlier this week it offered Sony a 10-year contract for the same ‘Call Of Duty’ cross-platform release dates on its PlayStation as on its Xbox platform.
Redmond also this week signed a 10-year commitment to offer ‘Call of Duty’ to Nintendo platforms.
Despite this, the US Federal Trade Commission (FTC), which enforces antitrust law in America, announced that Microsoft had a record of hoarding valuable gaming content – as it seeks to block the deal.
Indeed, the US federal 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
“The Federal Trade Commission is seeking to block technology giant Microsoft Corp. from acquiring leading video game developer Activision Blizzard, Inc. and its blockbuster gaming franchises such as Call of Duty, alleging that the $69 billion deal, Microsoft’s largest ever and the largest ever in the video gaming industry, would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business,” the agency stated.
In a complaint issued Thursday, the FTC pointed 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 (the studio behind gaming titles such as Doom and Fallout).
The FTC noted 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.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition.
“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.”
The FTC noted in its complaint that besides Microsoft’s Xbox Series S and Series X video game consoles, Redmond also offers a leading video game content subscription service called Xbox Game Pass, as well as a cutting-edge cloud-based video game streaming service.
Multiple platforms
The FTC also noted the huge gaming portfolio of Activision Blizzard, which is currently offered across multiple platforms, regardless of producer.
The FTC said this could change if the deal is allowed to proceed.
“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,” it said.
The FTC has therefore issued an administrative complaint when it has “reason to believe” that the law has been or is being violated, which marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.
The agency set a hearing before an administrative law judge for August 2023.
Microsoft response
Microsoft pledged to fight the FTC complaint.
Microsoft President Brad Smith tweeted that Microsoft had already offered the FTC some concessions this week, and it has complete confidence in its case.
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, 2022
The FTC move to block the deal is the latest signal that regulatory authorities around the world are taking a more aggressive approach to antitrust enforcement.
The US Department of Justice recently stopped a $2.2 billion merger of Penguin Random House, the world’s largest book publisher, and smaller US rival Simon & Schuster.
In October the UK’s Competition Markets Authority (CMA) ordered Mark Zuckerberg and Meta to divest itself of its Giphy purchase.
Meta said it accepted the CMA decision as the final word on the matter, and would sell off Giphy, settling a dispute that has seen both sides remain at loggerheads for nearly two years.
A number of acquisitions of British and German chip companies by Chinese owned entities has also been blocked by their respective governments on national security grounds.
