The Federal Trade Commission (FTC) has filed a lawsuit to block Microsoft’s planned acquisition of Activision Blizzard.
In January, Microsoft has announced plans to purchase Activision Blizzardbut according to a press release issued by american guard (opens in a new tab)The FTC says Microsoft’s proposed acquisition of the Call of Duty publisher “would enable Microsoft to stifle competitors for its Xbox game consoles and its rapidly expanding subscription content and cloud gaming business.”
The redacted complaint (opens in a new tab) itself claims that the merger “would significantly reduce competition or create a monopoly in many markets.” In layman’s terms, this could give Microsoft control of some markets due to lack of competition.
Not only is the FTC concerned that the acquisition creates “increased incentive to use [Microsoft’s] of Activision’s titles to the detriment of Microsoft’s competitors,” but the complaint also details concerns about Microsoft’s potential to manipulate markets in the long term by adjusting Activision’s price points. Microsoft has already announced plans increase the price of exclusive Xbox games in 2023
The lawsuit is a critical obstacle to Microsoft’s acquisition of Activision Blizzard and could end up stopping the proposed purchase altogether.
Much ado about everything
In recent years, Microsoft has loosened the strings on the company’s portfolio considerably; his offer of a staggering $68.7 billion to the Call of Duty publisher is just the tip of the iceberg. The lawsuit filed by the FTC highlights that Microsoft’s recent acquisitions are cause for concern if the planned acquisition of Activision Blizzard goes ahead.
“Microsoft’s past conduct is a preview of the combined company’s likely plans should it complete the proposed acquisition [of Activision-Blizzard]despite all assurances the company may make about its plans,” the complaint reads.
He cites the acquisition of Bethesda’s triple parent company, ZeniMax, as an example. It was a highly controversial purchase, but the FTC refers to how Microsoft told the European Commission (EC) that they “would have no incentive to withhold ZeniMax titles from competing consoles.”
But shortly after the EC approved the deal, Microsoft made public its decision to release several newly acquired ZeniMax titles, including Starfieldredfall i Elder Scrolls 6Microsoft exclusivity.
This means that despite Microsoft’s assurances before the EC and from pressure on Starfield to be a vendor for the platform as the first work of Bethesda under the Microsoft banner, the upcoming titles of the studio will not debut on competing consoles PS5 or Nintendo Switch Despite everything.
We continue to believe our deal to acquire Activision Blizzard will increase competition and create more opportunities for gamers and game developers.December 8, 2022
Microsoft CEO Brad Smith publicly responded to the lawsuit Twitter (opens in a new tab)specifically addressing the FTC’s concerns about Microsoft’s potential use of the merger as a major market disruptor that could cut off their competitors at source.
“We continue to believe our deal to acquire Activision Blizzard will increase competition and create more opportunities for gamers and game developers,” his first comment read.
“While we believe that peace should be given a chance, we have full confidence in our case and are delighted to be presented in court,” Smith said in a supplementary statement. Tweet (opens in a new tab).
Activision Blizzard also publicly responded to the lawsuit, with CEO Bobby Kotick releasing the news letter to employees (opens in a new tab) and addressing some of the claims made in the lawsuit.
“I want to reinforce my confidence that this deal will go through,” says Kotick, echoing Smith’s opinion. “The allegation that this deal is anti-competitive is not factually correct and we believe we will win this challenge.”
Kotick appears to be addressing the FTC indirectly by issuing a vote of confidence in the merger:
“We believe these arguments will win despite a regulatory environment focused on ideology and misconceptions about the tech industry.”
What next for Microsoft?
After the FTC vote agreed three to one (opens in a new tab) that he will take Microsoft to court. However, the lawsuit should not be taken as a sure sign that the transaction will be blocked before completion. While they may slow down proceedings in general, they do not constitute a contract.
The FTC’s concerns are also not the first. Earlier this year, Microsoft faced similar concerns (opens in a new tab) from the UK Competition and Markets Authority, which claimed the merger could hurt Sony by withholding key titles from a rival console. This shows that it’s not just the FTC that is suspicious of Microsoft, as the proposed purchase is under scrutiny by international regulators.
As for the FTC filing, Microsoft will have a chance to defend its position in court. No hearing dates have been disclosed at the time of writing.