FTC tries to block Microsoft’s acquisition of Activision Blizzard in court

The Federal Trade Commission filed a lawsuit on Thursday to block Microsoft’s acquisition of Activision Blizzard for $69 billion, challenging one of the biggest technology acquisitions in history.

The administrative complaint filed Thursday by the FTC alleges that the blockbuster settlement, which would make Microsoft the world’s third-largest video game publisher, would give Microsoft “both the means and the motive to harm competition” – claiming it could negatively affect video game prices, as well as game quality and player experiences across game consoles and services, according to an agency statement.

“We continue to believe this agreement will expand competition and create more opportunities for gamers and game developers,” Brad Smith, president of Microsoft, said in a statement on Thursday. “We are committed from day one to addressing competition issues, including offering proposed concessions earlier this week to the FTC. While we believe in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.”

In an email sent to employees and provided to CNN, Activision CEO Bobby Kotick said the FTC lawsuit may sound “alarming,” but he remains confident the deal will close. “The allegation that this agreement is anti-competitive does not line up with the facts and we believe we will meet this challenge,” he said.

The US merger defiance reflects the biggest setback yet for Microsoft, which has aggressively courted regulators around the world in hopes of convincing them to pass the deal. It also marks the FTC’s most significant challenge to the tech industry since it sued Facebook owner Meta in 2020, underscoring US authorities’ vocal promises of a tough antitrust agenda.

“This is the boldest move the Biden administration has made to date to police Big Tech mergers and expand the merger enforcement domain,” said William Kovacic, professor of law at George Washington University and former chairman of the FTC. “More than anything else they’ve done, this represents their commitment to toughen up mergers.”

The case could also mark a turning point in how regulators and courts review proposed settlements, at a time when US antitrust authorities have intentionally brought hard cases to test the law and keep pace with advances in technology.

Microsoft’s proposed deal would give it control over major video game franchises, including “Call of Duty”, “World of Warcraft” and more. That could have enormous influence on the future of a multibillion-dollar industry, the FTC said.

“Today, we seek to prevent Microsoft from gaining control of a leading independent game studio and using it to undermine competition in several dynamic and fast-growing gaming markets,” Holly Vedova, director of the FTC’s Bureau of Competition, said in a statement. .

UK and EU officials also scrutinized the deal as potentially anti-competitive. But the FTC’s complaint marks the first attempt by an antitrust regulator to block the deal altogether.

Microsoft could use its ownership of Activision titles to raise prices or try to funnel gamers to the gaming platforms it controls, such as Xbox or Windows, the FTC said. The deal could also affect the emerging market for cloud-based gaming services, said the FTC, which Microsoft is involved with through its subscription service, Xbox Game Pass.

In recent days, Microsoft has announced a series of partnerships seemingly designed to stave off claims that it would withhold rival game content. This week, Microsoft said it reached a 10-year agreement with Nintendo, guaranteeing it will have access to Call of Duty for the foreseeable future.

In a Wall Street Journal op-ed on Monday, Microsoft’s Smith said an FTC lawsuit to block the Activision deal would be a “big mistake” and added that the acquisition would allow Microsoft to innovate new features. , such as the consumer’s ability to play the same game on multiple devices, just as they can with streaming TV shows or music.

Months earlier, in February, Microsoft made an 11-point pledge relating to all of its app markets and its games business. The list included a pledge, which would cover the proposed deal with Activision, not to give preferential treatment to its own games published on the digital marketplaces it manages.

The FTC’s claim uses an internal administrative process that does not involve filing in a federal court. That could give the FTC a theoretical advantage, Kovacic said, as an FTC administrative law judge might be inclined to give regulators the benefit of the doubt. But, he added, the FTC still must assemble compelling evidence and arguments to win the case, which could take years to complete.