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FTC Sues to Block Microsoft’s $69 Billion Activision Blizzard Acquisition

activision blizzard
Cheyne Gateley/Variety Intelligence Platform; Adobe Stock

The FTC filed an antitrust lawsuit seeking to prevent Microsoft from acquiring Activision Blizzard, maker of video-game franchises including “Call of Duty,” “Overwatch” and “World of Warcraft,” alleging that it would let Microsoft “suppress competitors” in the sector.

The proposed $69 billion deal, announced earlier this year, would be Microsoft’s biggest ever and the largest to date in the video-game. The Federal Trade Commission, in announcing the lawsuit, alleged that Activision Blizzard would let Microsoft “suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.”

“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 FTC said in announcing the lawsuit.

In a statement posted on Twitter, Microsoft president Brad Smith said, “We continue to believe that our deal to acquire Activision Blizzard 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. While we believe in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present it in court.”

The “proposed concessions” the Microsoft exec was referring to was the tech giant’s promise to make “Call of Duty” available on Nintendo platforms for the first time as well as on Valve’s Steam for a period of at least 10 years once the merger with Activision Blizzard closes. Microsoft previously made the same 10-year pledge to keep “Call of Duty” on Sony’s PlayStation consoles, and Smith said the company was willing to make it “legally enforceable by regulators in the U.S., U.K. and European Union.” Sony — which has publicly opposed the Activision deal — has not commented on Microsoft’s “COD” offer.

Activision Blizzard CEO Bobby Kotick, in a memo to staff after the FTC’s announcement, wrote that the lawsuit “sounds alarming, so I want to reinforce my confidence that this deal will close. The allegation that this deal is anticompetitive doesn’t align with the facts, and we believe we’ll win this challenge.” He also criticized “a regulatory environment focused on ideology and misconceptions about the tech industry.”

In the lawsuit, the FTC pointed to Microsoft’s “record of acquiring and using valuable gaming content” to thwart competition from rival consoles. According to the agency, that has included its $7.5 billion acquisition of ZeniMax, parent company of game developer Bethesda Softworks. In that case, 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,” Holly Vedova, director of the FTC’s Bureau of Competition, said in a statement. “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.”

The FTC vote to sue Microsoft over the deal was 3-1, with commissioner Christine Wilson, who was appointed to the agency by Donald Trump, voting “no.”

Consumer advocacy group Public Citizen was among those praising the lawsuit to block the merger. “The proposed deal raises too many red flags to proceed, especially considering that Microsoft is already operating in several concentrated sectors of the economy including consumer electronics, cloud computing, software development, hardware development, internet search, social networking, virtual reality and video gaming,” Matt Kent, competition policy advocate for Public Citizen, said in a statement. “The FTC is showing, once again, that it is serious about enforcing the law, reversing corporate concentration and taking on the tough cases.