FTC will seek to block Microsoft’s $69-billion deal for Activision
The Federal Trade Commission is seeking to block Microsoft’s $69-billion acquisition of Activision Blizzard, saying a tie-up between the Xbox maker and popular game publisher would harm competition.
Regulators said Microsoft’s ownership of Activision could curb competition in the gaming market, which is worth more than $200 billion, by limiting rivals’ access to the company’s biggest games.
“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.”
An FTC official, speaking anonymously to discuss the complaint, said the agency was concerned that Microsoft could deny access, delay availability or degrade the quality of Activision Blizzard’s most popular titles on rival platforms. Those concerns relate not only to consoles but also to subscription services and cloud-based gaming, two markets still in development, the official said.
The commission voted 3 to 1 in favor of the complaint, which was filed in its in-house court.
Microsoft’s proposed Activision Blizzard deal is the company’s largest ever and one of the 30 biggest deals of all time. The transaction would give Microsoft, the maker of Xbox consoles, some of the most popular video game titles such as “Call of Duty” and “World of Warcraft.” The latest of the “Call of Duty” franchise — “Warzone 2.0” — was the top-selling video game last year, according to data from NPD Group. Microsoft already owns the “Halo” franchise and “Minecraft” virtual-world-building game.
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“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” said Brad Smith, Microsoft’s president. He said that the company is committed to addressing competition concerns and that it offered concessions to the FTC earlier this week.
“We have complete confidence in our case and welcome the opportunity to present our case in court,” Smith added.
Activision shares fell 1.5% to $74.76 after falling as much as 3.9% earlier. Microsoft shares rose 1.2% to $247.40.
In a letter, Activision Blizzard Chief Executive Bobby Kotick told employees he is confident that the deal will close.
“The allegations that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” Kotick said, adding that the combined company would be “good for players,” despite a regulatory environment that he says is “focused on ideology and misconceptions about the tech industry.”
In its release announcing the lawsuit, the FTC cited Microsoft’s decision to make two upcoming titles by newly acquired unit Bethesda Softworks exclusive to Microsoft’s platforms despite assurances the company gave to European Union regulators that it had no incentive to withhold games from rival consoles.
The FTC lawsuit is part of an effort by FTC Chair Lina Khan to more aggressively police mergers, particularly those by the biggest tech platforms. Since President Biden appointed her to lead the agency in June 2021, the agency has killed a merger between Lockheed Martin and Aerojet Rocketdyne Holdings as well as Nvidia’s bid to buy SoftBank Group’s Arm Ltd. The FTC heads to federal court in San Jose later Thursday in an effort to block Meta Platforms from buying a virtual reality startup.
Although Brazilian antitrust officials cleared the deal in October, other competition regulators, including the United Kingdom and the EU, have also raised concerns. Those two competition authorities aren’t set to issue decisions on the deal until next year.
Microsoft on Tuesday announced a deal to bring “Call of Duty” to the Steam PC gaming platform and Nintendo consoles. The company said it’s also offered a proposal that would keep “Call of Duty” on Sony’s PlayStation for the next 10 years, but the Japanese electronics giant has so far rebuffed efforts to work out a resolution.
Joost van Dreunen, a video game expert who teaches at New York University’s Stern School of Business, said antitrust authorities have become skeptical of pledges, particularly by the tech platforms, about future behavior. Van Dreunen provided comments on the deal to U.K. competition officials.
“I don’t think it’s ultimately enough for the FTC to go on,” Van Dreunen said of Microsoft’s pledge.
The Redmond, Wash., tech giant sought to placate possible labor concerns about the merger by reaching an agreement with the Communications Workers of America, which also represents workers in the gaming industry. In the pact, Microsoft pledged to take a neutral approach if employees express interest in joining a union.
The company also said it would stop using noncompete or confidentiality clauses to bar workers from talking about discrimination or harassment as part of a settlement or separation deal.
The FTC has publicly raised concerns about the use of noncompete clauses and the effects of mergers on labor conditions.
The agency’s in-house proceedings, overseen by Administrative Law Judge D. Michael Chappell, generally take several months to a year to resolve.
