The Federal Trade Commission has filed an antitrust complaint to try to block Microsoft’s planned $68.7 billion acquisition of Activision Blizzard. The FTC began investigating the deal and its potential impact on the video game market shortly after it was announced in January. The agency was obviously concerned enough to try to slow down the purchase. The FTC said the settlement, if reached, would “allow Microsoft to suppress competitors in its Xbox game consoles and its fast-growing subscription content and cloud gaming business.”
“Microsoft has already demonstrated that it can and will withhold content from its gaming rivals,” Holly Vedova, director of the FTC’s Office of Competition, said in a press release. “Today, we seek to prevent Microsoft from gaining control of a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing game markets.”
FTC commissioners voted in favor of the lawsuit along party lines, with all three Democratic members approving it. The only Republican commissioner, Christine S. Wilson, voted against the lawsuit in a closed-door meeting.
“The FTC pointed to Microsoft’s record of acquiring and using valuable game content to suppress competition from rival consoles, including its acquisition of ZeniMax, the parent company of Bethesda Softworks (a well-known game developer),” he said. say the agency in a press release. “Microsoft decided to make several of Bethesda’s titles, including Starfield and Redfall, Microsoft exclusives despite assurances it had given European antitrust authorities that it had no incentive to withhold games from rival consoles.”
While the lawsuit doesn’t necessarily kill the deal, it’s unlikely to be settled in July, as Politico recently noted, which had reported that an FTC bid to block the merger was likely. This was the deadline set by Microsoft and Activision to close the deal. If the acquisition has not closed, the companies will have to renegotiate the deal or even abandon the merger. Regulators in other jurisdictions have been closely scrutinizing the deal, including in the UK and the European Union (which are due to complete their investigation by the end of March).
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Sony is the most prominent opponent of the merger. He has expressed concern about Microsoft making games like Call of Duty exclusive to Xbox platforms, which could cost Sony hundreds of millions of dollars a year. However, Microsoft has said it wants to keep Call of Duty on PlayStation and claims to have offered Sony a 10-year deal to that effect.
Just before the FTC’s vote, Microsoft said it reached an agreement with Nintendo to bring Call of Duty games to the company’s systems if the merger closes. Call of Duty will also remain on Steam as part of a separate pact with Valve.
Microsoft and Activision have been downplaying the importance of the deal in an attempt to appease regulators and push it through. For one thing, Microsoft has claimed that Sony has more exclusive games, “many of which are of better quality”, in a filing with the UK’s Competition and Markets Authority (CMA). He also said that Activision Blizzard doesn’t have any “must-have” games, despite having some of the world’s most popular titles (including Call of Duty: Modern Warfare II, Overwatch 2 and World of Warcraft) under its umbrella.
The FTC refuted these suggestions in its complaint. The agency stated that Activision is “one of the few leading video game developers in the world creating and publishing high-quality video games for multiple devices.” He noted that between franchises like Call of Duty, World of Warcraft, Diablo and Overwatch, Activision has more than 154 million monthly active users.
Microsoft has suggested that the acquisition deal is more about gaining a foothold in the mobile gaming market, where Activision’s King division is a major player. For example, Candy Crush Saga has had over 3 billion downloads.
Ultimately, the FTC believes that the merger would likely harm competition in the video game market. “With control of Activision’s blockbuster franchises, Microsoft would have both the means and the motive to harm competition by manipulating Activision’s prices, degrading the quality of Activision’s games, or the player experience on consoles and rival game services, changing the terms and timing of access to Activision’s content, or completely withholding competitors’ content, causing harm to consumers,” the agency said.
Noting that the FTC is suing to block the merger, Activision Blizzard CEO Bobby Kotick wrote in a memo to employees that “This sounds alarming, so I want to reinforce my confidence that this deal will close. The “allegation that this deal is anti-competitive. It does not align with the facts and we believe we will win this challenge.”
Kotick added that “a combination of Microsoft-[Activision Blizzard King] it will be good for the players, good for the employees, good for the competition and good for the industry. Our players want choice, and this gives them exactly that.”
“We continue to believe that our agreement to acquire Activision Blizzard will expand competition and create more opportunities for gamers and game developers,” Microsoft President Brad Smith wrote on Twitter. “We have been committed from day one to addressing competition issues, including by offering concession proposals to the FTC earlier this week. While we believe in giving peace a chance, we have full confidence in our case and we welcome the opportunity to present it to the courts.”
Update 12/8 2:58 PM ET: Added comments from Bobby Kotick and Brad Smith.