FTC sues to block Microsoft’s $69 billion acquisition of Activision Blizzard | CNN Business

Washington
CNN
—

On Thursday, the Federal Trade Commission filed a lawsuit to block Microsoft’s $69 billion acquisition of Activision Blizzard, challenging one of the biggest tech acquisitions in history.

The administrative complaint filed Thursday by the FTC alleges that the blockbuster deal, which would make Microsoft the world’s third-largest video game publisher, would give Microsoft “both the means and the motive to harm competition” – claiming that ‘it could negatively affect video game prices as well as game quality and player experiences on consoles and game services, according to a statement from the agency.

“We continue to believe that this agreement will broaden competition and create more opportunities for gamers and game developers,” Microsoft President Brad Smith said in a statement Thursday. “We have been committed from day one to resolving competition issues, including offering proposed concessions to the FTC earlier this week. While we believed in giving peace a chance, we have complete confidence in our case and we welcome the opportunity to present our case in court.

In an email sent to employees and provided to CNN, Activision CEO Bobby Kotick said the FTC lawsuit may seem “alarming,” but he remains confident the deal will work. “The allegation that this deal is anti-competitive does not fit the facts, and we believe we will win this challenge,” he said.

The U.S. merger challenge mirrors the biggest setback ever for Microsoft, which has aggressively courted regulators around the world in hopes of persuading them to sign the deal. It also marks the FTC’s most significant challenge to the tech industry since it filed a lawsuit to take down Facebook owner Meta in 2020, underscoring US officials’ vocal promises of a tough enforcement program. enforcement of antitrust laws.

“This is the boldest move the Biden administration has made so far on police mergers involving Big Tech and to expand the realm of merger enforcement,” said William Kovacic, a law professor at the University. George Washington University and former Chairman of the FTC. “More than anything they’ve done, it embodies their commitment to cracking down on mergers.”

The case could also mark a turning point in how regulators and courts review proposed deals, at a time when US antitrust authorities have intentionally brought in tough cases to test the law and keep up with advances in technology.

Microsoft’s proposed deal would give it control over major video game franchises, including “Call of Duty,” “World of Warcraft” and more. That could give him huge influence over the future of a multi-billion dollar industry, the FTC said.

“Today we seek to prevent Microsoft from taking control of a leading independent game studio and using it to harm competition in several dynamic and fast-growing game markets,” said Holly Vedova. , director of the FTC’s Competition Bureau, in a statement.

Officials in the UK and European Union have also reviewed the deal as potentially anti-competitive. But the FTC complaint marks the first attempt by an antitrust regulator to block the deal outright.

Microsoft could use its ownership of Activision titles to raise prices or try to steer players to gaming platforms it controls, such as Xbox or Windows, the FTC said. The deal could also affect the emerging market for cloud-based gaming services, the FTC said, in which Microsoft is involved through its subscription service, Xbox Game Pass.

In recent days, Microsoft has announced a series of partnerships seemingly intended to sidestep claims that it is withholding gaming content from rivals. This week, Microsoft said it had reached a 10-year deal with Nintendo guaranteeing it will have access to Call of Duty for the foreseeable future.

In a Wall Street Journal op-ed on Monday, Microsoft’s Smith said an FTC lawsuit to block Activision’s deal would be a “huge mistake” and added that the acquisition would allow Microsoft to innovate new features such as the ability for the consumer to play the same way. play across multiple devices, just like they can with streaming TV shows or music.

Months earlier, in February, Microsoft made an 11-point promise across all of its app marketplaces and games business. The listing included a promise, which would cover the proposed deal with Activision, not to give preferential treatment to its own games published on the digital marketplaces it manages.

The FTC’s complaint uses an internal administrative process that does not involve filing in federal court. That could give the FTC a theoretical advantage, Kovacic said, because an FTC administrative law judge might be inclined to give regulators the benefit of the doubt. But, he added, the FTC still needs to piece together convincing evidence and arguments to win the case, which could take years to materialize.