The Federal Trade Commission (FTC) is suing to block Microsoft’s $68.7 billion acquisition of video game company Activision Blizzard.
What happened? The FTC voted 3-1 in favor of halting Microsoft’s acquisition of gaming giant Activision Blizzard – developers of billion-dollar franchises including Call of Duty, Overwatch, and World of Warcraft, among others. Republican commissioner Christine Wilson was the lone dissenting vote.
Why did the FTC vote this way? According to a release, the commission believes that if the deal goes through, Microsoft will be able to suppress competition and funnel gamers onto the Xbox consoles while growing subscription content and its cloud-gaming business. At the moment, Activision Blizzard games are available on several consoles, but the FTC believes its games would become Xbox exclusives in this deal is allowed to go through.
What did the FTC Say? The commission released a statement that predicted: “With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers.”
Has that happened before? It has. After acquiring ZeniMax, the parent company of Bethesda Softworks, Microsoft made several of that company’s titles – including the upcoming Starfield and Redfall – Microsoft exclusives, despite assurances made to European antitrust authorities that it had no plans to limit games availability on rival consoles.
What does this mean? This is a big deal for Microsoft, which lobbied hard to get the deal past the FTC. The company embarked on a major PR campaign to sway public opinion in its favor, including a Wall Street Journal op-ed from president Brad Smith titled “Microsoft’s Activision-Blizzard Acquisition Is Good for Gamers.” If the deal doesn’t go through now, it could be seen as a warning to other tech giants that are looking to buy up smaller competitors.
Microsoft’s response: After the FTC made its decision public, Microsoft released a statement in which Smith argued, “We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers. We have been committed since day one to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC.”
Activision Blizzard’s response: In an inter-office memo published by Deadline, embattled Activision Blizzard CEO Bobby Kotick expressed confidence that the deal will still go through, saying: “This sounds alarming, so I want to reinforce my confidence that this deal will close. The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge.”
What’s next for the deal? There are still plenty of battles left to fight in this war between Microsoft and antitrust authorities. Under chair Lina Khan, the FTC has expanded its antitrust mandate and seems to be taking a harder line on these types of acquisitions. In a recent example, the agency successfully sued to block Paramount’s $2.2 billion sale of Simon & Schuster to Penguin House Random. And, given Microsoft’s history, the Activision Blizzard deal looks likely to face harsher scrutiny still in Europe and the U.K., where authorities have already raised concerns about the non-competitive nature of Microsoft’s business practices, like the Bethesda acquisition.