Microsoft is heading into a battle with the Federal Trade Commission over whether the United States will block the tech giant’s planned takeover of video game company Activision Blizzard.
Microsoft on Thursday filed a formal challenge to the FTC lawsuit saying the $68.7 billion deal was an illegal acquisition that should be stopped.
After years of avoiding the political backlash that has been directed at big tech peers such as Amazon and Google, the software giant now appears to be on a collision course with U.S. regulators emboldened by pressure from President Joe Biden. to crack down on anti-competitive behavior.
The FTC says the merger could violate antitrust laws by removing competitors from Microsoft’s Xbox game console and its growing Xbox Game Pass subscription business.
At the center of the dispute is Microsoft’s rivalry with PlayStation maker Sony to secure popular Activision Blizzard franchises like military shooter Call of Duty.
Microsoft’s response to the FTC attempts to downplay Xbox’s role in the industry, describing itself as the “third largest game console maker” behind Sony and Nintendo, and one of many popular video game publishers with ” almost no presence in mobile”. gaming”, where he tries to make a profit.
The dispute could be a tough test case for Biden-appointed FTC Chair Lina Khan, who has sought to strengthen antitrust enforcement. The FTC voted 3-1 earlier in December to file the lawsuit to block the deal, with Khan and the other two commissioners Democrats voting in favor and the only Republican voting against.
The deal is also the subject of intense scrutiny in the European Union and the United Kingdom, where investigations are not expected to be completed until next year.
The FTC complaint points to Microsoft’s 2021 acquisition of well-known game developer Bethesda Softworks and its parent company ZeniMax, as an example of where Microsoft is making some upcoming Xbox-exclusive game titles though. he assured European regulators that he had no intention of doing so.
Microsoft objected to the FTC’s characterization on Thursday, saying it had made it clear to European regulators that it would “address exclusivity for future game titles on a case-by-case basis, which is exactly what it did”.
The FTC lawsuit describes top-selling franchises like Call of Duty as important because they develop a loyal user base attached to their favorite console or streaming service.
“With control of Activision content, Microsoft would have the ability and increased incentive to withhold or degrade Activision content in ways that significantly lessen competition, including competition on quality, price, and innovation. products,” the FTC lawsuit states. “This loss of competition would likely cause significant harm to consumers in multiple markets at a pivotal time for the industry.
Microsoft has said it will vigorously fight the case in court with a team led by top corporate lawyer Beth Wilkinson, while leaving open the possibility of a settlement.
“Even with confidence in our case, we remain committed to creative solutions with regulators that will protect competition, consumers and tech workers,” Microsoft Chairman Brad Smith said in a statement Thursday. “As we have learned from our trials in the past, the door never closes on the possibility of reaching an agreement that can benefit everyone.
Microsoft’s last major antitrust battle took place more than two decades ago when a federal judge ordered its dissolution following the company’s anticompetitive actions related to its dominant Windows software. This verdict was overturned on appeal, although the court imposed other sanctions on the company.
The FTC’s decision to send the complaint to its House Administrative Judge D. Michael Chappell instead of seeking an urgent federal court injunction to stop the merger could drag the case out at least until August, when the first hearing evidence is provided. Microsoft’s deal with Activision Blizzard requires it to pay the video game company a severance fee of up to $3 billion if it can’t complete the deal by July 18.
The timing and trajectory of the case could change depending on how UK and European regulators rule on the merger next year. If Microsoft gets approval in Europe, it could use it to try to speed up the process in US courts.
The merger faced another challenge this week from a group of individual video game players who filed a lawsuit in federal court in San Francisco to end the deal on antitrust grounds.
The plaintiffs, all fans of Activision Blizzard’s Call of Duty franchise and other popular titles such as World of Warcraft, Overwatch and Diablo, are particularly concerned about how consolidation would affect quality, innovation and production. future of the games, said their lawyer Joseph Alioto.
“When there is a lack of competition, the quality necessarily drops,” Alioto said. “By eliminating Activision, it gives Microsoft such a strong position that they can do whatever they want.”