FTC Sues to Block Microsoft’s Acquisition of Activision Blizzard (UPDATED)

UPDATE: I added a quote that Microsoft provided after publication. –Paul

The U.S. Federal Trade Commission (FTC) today filed a lawsuit to block Microsoft’s $69 billion acquisition of Activision Blizzard.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” FTC director Holly Vedova said. “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 specifically calls out of Call of Duty in its announcement, suggesting that the concerns that were voiced by Sony—and pretty much only Sony—resonated with it, despite Microsoft’s assurances regarding the franchise, and despite the fact that this acquisition is more about mobile games that console and PC games. But the FTC says that could use the acquisition to “suppress competitors to … its rapidly growing subscription content and cloud-gaming business.”

As evidence of Microsoft’s potential harm in the wake of the acquisition, the FTC points to its acquisition of ZeniMax, the parent company of Bethesda. “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,” it claimed.

Between Call of Duty and its other popular games, Activision Blizzard has over 154 million active users around the world, across multiple platforms. But “that could change,” the FTC says, if Microsoft gets control of those games. “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,” it says.

That is, of course, nonsense: Microsoft has pursued a strategy of meeting gamers where they are, and it allows its game studios to operate independently and deliver the right products to the right platforms. As Microsoft president Brad Smith put it recently, it is “economically irrational” for Microsoft to limit the distribution of its games.

The FTC vote on this acquisition was 3-1, and had reportedly alerted Microsoft to the vote early, which led to Smith’s editorial—a preview of Microsoft’s defense—and a group from the software giant heading to Washington to dispute the concerns. The European Commission has expressed similar concerns but has not released its decision yet.

“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Microsoft president Brad Smith said. “We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present it in court.”

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