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Author of the article:
The Associated Press
Matt O’Brien
Posted on December 22, 2022 • Last updated 30 minutes ago • 4 minutes read
Join the conversation FILE – Activision Blizzard’s booth during the Electronic Entertainment Expo in Los Angeles, June 13, 2013. Microsoft is headed for a battle with the Federal Trade Commission, filing a formal challenge Thursday December 22, 2022 on whether the United States will block the planned takeover by the technology giant of the video game company Activision Blizzard. Photo by Jae C. Hong /THE ASSOCIATED PRESS
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Microsoft is headed for a battle with the Federal Trade Commission over whether the U.S. will block tech giant Activision Blizzard’s planned takeover of video game company.
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Microsoft on Thursday filed a formal challenge to the FTC’s demand to declare the $68.7 billion deal an illegal acquisition that should be stopped.
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Content of the article
After years of avoiding the political backlash that has targeted big tech peers like Amazon and Google, the software giant now appears to be on a collision course with U.S. regulators fueled by a push by the President Joe Biden for engaging in anti-competitive conduct.
The FTC claims the merger could violate antitrust laws by cutting off competitors to Microsoft’s Xbox game console and its growing Xbox Game Pass subscription business.
At the heart of the dispute is Microsoft’s rivalry with PlayStation maker Sony to land popular Activision Blizzard franchises such as military shooter Call of Duty.
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Microsoft’s response to the FTC tries to downplay Xbox’s role in the industry, describing itself as the “third largest game console manufacturer” behind Sony and Nintendo, and one of many popular video game publishers with “virtually no mobile presence”. gaming”, where he is trying to make a profit.
The dispute could be a difficult test case for FTC Chairwoman Lina Khan, a Biden appointee, who has sought to strengthen enforcement of antitrust rules. The FTC voted 3-1 in early December to issue the complaint to block the deal, with Khan and the other two Democratic commissioners voting in favor and the lone Republican voting against.
The deal is also under close scrutiny in the European Union and the United Kingdom, where investigations are not due to be completed until next year.
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The FTC complaint points to Microsoft’s 2021 acquisition of well-known game developer Bethesda Softworks and its parent company ZeniMax as an example of where Microsoft is making some upcoming game titles exclusive to Xbox despite assuring European regulators that he had no intention of doing so.
Microsoft on Thursday disputed the FTC’s characterization, saying it made clear to European regulators that it would “approach exclusivity for future game titles on a case-by-case basis, which is exactly what it has done.”
The FTC suit describes best-selling franchises like Call of Duty as important because they develop a loyal user base connected to their favorite console or streaming service.
“With control of Activision’s content, Microsoft would have the ability and increased incentives to withhold or degrade Activision’s content in ways that substantially reduce competition, including competition in product quality, price and innovation,” the FTC’s lawsuit says. “This loss of competition would likely cause significant harm to consumers in several markets at a crucial time for the industry.”
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Microsoft signaled that it will vigorously fight the case in court with a team led by high-profile corporate lawyer Beth Wilkinson, while leaving open the possibility of a settlement.
“Even with confidence in our case, we remain committed to creative solutions with regulators that will protect competition, consumers and workers in the technology sector,” Microsoft President Brad Smith said in a statement Thursday. “As we have learned from our lawsuits in the past, the door is never closed to the opportunity to find a settlement that can benefit everyone.”
Microsoft’s last major antitrust battle came more than two decades ago, when a federal judge ordered its breakup following the company’s anticompetitive actions related to its dominant Windows software. That verdict was overturned on appeal, although the court imposed other penalties on the company.
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The FTC’s decision to send the complaint to its in-house Administrative Law Judge D. Michael Chappell instead of seeking an urgent federal injunction to stop the merger could drag the case out at least until August, when the first evidence hearing. Microsoft’s deal with Activision Blizzard requires it to pay the video game company a breakup fee of up to $3 billion if it can’t close the deal by July 18.
The timing and trajectory of the case could change depending on how UK and European regulators decide the merger next year. If Microsoft wins approval in Europe, it could use it to try to speed up the process in U.S. courts.
The merger faced another challenge this week from a group of individual video game players who sued in federal court in San Francisco to stop the deal on antitrust grounds.
The plaintiffs, all fans of Activision Blizzard’s Call of Duty franchise and other popular titles such as World of Warcraft, Overwatch and Diablo, are particularly concerned about how the consolidation would affect the game’s future quality, innovation and performance , said his lawyer Joseph Alioto.
“When there’s a lack of competition, quality necessarily goes down,” Alioto said. “By removing Activision, it gives Microsoft such a strong position that they can do whatever they want.”
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