As was was expected, the US Federal Trade Commission has now voted and filed a suit to block Microsoft’s $69 billion acquisition of Activision Blizzard, saying the deal would harm competition. As reported by Bloomberg, the commission voted 3-1 on the matter and already filed the suit. The proceedings usually take from several months to a year to resolve, and here’s what Holly Vedova, Director of the FTC’s Bureau of Competition had to say:
Microsoft has already shown that it can and will withhold content from its gaming rivals. 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.
Microsoft has been trying to address the exclusivity issues recently, offering 10 year Call of Duty availability deals to Steam, Nintendo and Sony, to assuage their concerns about Activision Blizzard titles becoming available on Microsoft platforms only, as the main focal point of the exclusivity discussion has been Activision’s premiere FPS franchise.
This also isn’t the only legislative opposition the merger faces, as both UK and EU organizations and legislative bodies are in the process of evaluating whether the deal can be approved. When it comes to the FTC, since Lina Khan was appointed to lead the agency in 2021, it has successfully blocked mergers between Lockheed Martin and Aerojet Rocketdyne Holdings as well as Nvidia ’s attempt to buy ARM.
Here’s the full press release from the FTC:
The Federal Trade Commission is seeking to block technology giant Microsoft Corp. from acquiring leading video game developer Activision Blizzard, Inc. and its blockbuster gaming franchises such as Call of Duty, alleging that the $69 billion deal, Microsoft’s largest ever and the largest ever in the video gaming industry, would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.
In a complaint issued today, the FTC pointed to Microsoft’s record of acquiring and using valuable gaming content to suppress competition from rival consoles, including its acquisition of ZeniMax, parent company of Bethesda Softworks (a well-known game developer). Microsoft decided to make several of Bethesda’s titles including Starfield and Redfall Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles.
“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.”
Microsoft’s Xbox Series S and Series X are one of only two types of high performance video game consoles. Importantly, Microsoft also offers a leading video game content subscription service called Xbox Game Pass, as well as a cutting-edge cloud-based video game streaming service, according to the complaint.
Activision is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices, including video game consoles, PCs, and mobile devices. It produces some of the most iconic and popular video game titles, including Call of Duty, World of Warcraft, Diablo, and Overwatch, and has a combined 154 million monthly active users around the world, according to the FTC’s complaint. Activision currently has a strategy of offering its games on many devices regardless of producer.
But that could change if the deal is allowed to proceed. 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.
The Commission vote to issue the complaint was 3-1, with Commissioner Christine S. Wilson voting no. A copy of the administrative complaint will be available shortly.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.