The rebuttal foreshadows a coming legal battle between Microsoft, a tech giant that has largely avoided close regulatory scrutiny from federal authorities in recent years, and the FTC, whose chairwoman Lina Khan is a well-known skeptic of big tech.
Twin complaints signal new FTC strategy to rein in tech industry
Microsoft, the maker of the Xbox console, announced plans in January to buy Activision Blizzard, which has produced hit franchises like Call of Duty and Diablo. This month, after examining the potential merger, the FTC said it would block the deal, saying the move could incentivize Microsoft to impede access to Activision games on consoles made by rivals Sony or Nintendo.
“Microsoft already has a built-in incentive to promote its own products wherever possible, and it fully understands the competitive power that owning Activision’s leading gaming content would yield,” the FTC said.
The megadeal, which could become the largest acquisition in the history of the gaming industry if completed, according to the FTC, has been approved by regulators in Brazil and Saudi Arabia, The Washington Post reported. Serbia’s regulator has also greenlit the deal, according to Reuters. Authorities in Britain and the European Union are reviewing the potential merger.
Microsoft’s attorneys expressed willingness to go to court, saying the FTC’s concerns were unrealistic. Removing Activision games from rival consoles would be counterproductive to Microsoft’s chief aim of earning more revenue, they said.
“Maintaining broad availability of Activision games is both good business and good for gamers,” they said in a court filing, in response to the FTC’s complaint. Activision’s financial value comes from the continued sale of popular games like Call of Duty on Sony’s PlayStation, they said. “Paying $68.7 billion for Activision makes no financial sense if that revenue stream goes away.”
Activision’s lawyers likewise expressed disagreement with the FTC’s concerns about Microsoft being incentivized to take away access to Call of Duty on PlayStation. Such a move would immediately cost billions of dollars in revenue, they said, and hurt the game’s appeal of allowing users to play with other gamers at any part of the world, at any time.
“Withholding or degrading Call of Duty on PlayStation would eliminate this ability to cross-play and destroy the broad Call of Duty community that drives the game’s success,” they said. “The player backlash from making the Call of Duty franchise Xbox-exclusive would be devastating.”
Sony has been a vocal critic of the deal. It is concerned that Microsoft’s acquisition of the maker of Call of Duty would enable Microsoft to offer significantly cheaper prices to users who have long played the game on Sony’s PlayStation. Although Sony rewards Call of Duty players on PlayStation with exclusive perks like earlier access to in-game gear, Sony believes the lower prices could be enough to lure away users to Xbox, The Post previously reported.
The FTC also says that Microsoft’s recent $7.5 billion acquisition of ZeniMax Media, the parent company of another game publishing giant, Bethesda Softworks, is indicative of Microsoft’s growing dominance in the gaming industry.
The FTC said Microsoft had made some of Bethesda’s games like Starfield exclusive to Microsoft, despite assurances to European antitrust authorities that it had no incentive to withhold games from rival consoles.
Microsoft’s lawyers described the FTC’s account as misleading, saying their client had “explicitly said it would honor Sony’s existing exclusivity rights and approach exclusivity for future game titles on a case-by-case basis, which is exactly what it has done.”