Microsoft Responds to FTC’s Attempt to Block Activision Blizzard Deal

Microsoft on Thursday filed its response to US regulators’ antitrust case seeking to block the software maker from buying a video game publisher Activision Blizzardsaying the deal will not harm competition.

The Federal Trade Commission’s challenge to the proposed $68.7 billion takeover stands as the biggest government pushback Microsoft has faced at home since confronting the Justice Department two decades ago over Windows’ dominance of the Windows market. operating system.

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Under President Donald Trump, Google’s umbrella company Alphabet, Apple, Amazon and Facebook parent Meta have faced inquiries from U.S. competition officials. That left Microsoft running on business and continuing to expand with acquisitions through President-elect Joe Biden, even after Biden-appointed tech critic Lina Khan took over at the FTC. But then Microsoft revealed its plan to buy Activision Blizzard. In December 8 The FTC argued that the transaction would violate federal law.

“Even with confidence in our case, we remain committed to creative solutions with regulators that will protect competition, consumers and workers in the technology sector,” Brad Smith, president and vice president of Microsoft, said in a statement to CNBC . “As we have learned from our lawsuits in the past, the door is never closed to the opportunity to find a settlement that can benefit everyone.”

To ease government opposition to the deal, Microsoft has offered concessions.

In October, Phil Spencer, general manager of Microsoft’s gaming unit, said that Microsoft was committed to bringing Activision Blizzard’s Call of Duty games to Nintendo consoles for a decade and to keeping the games in Valve’s Steam game store. Microsoft has also offered to sign a 10-year deal with Sony to release Call of Duty games on PlayStation consoles the same day they hit Microsoft Xbox consoles. “Sony refuses to deal,” Microsoft said in its filing.

Activision Blizzard has not made its new games available through subscription services like Microsoft’s Game Pass, and the acquisition would make playing Activision Blizzard games more affordable, Microsoft said.

“A third-party console maker’s acquisition of a single game cannot upend a highly competitive industry,” Microsoft said in its response. “This is especially so when the manufacturer has made it clear that it will not withhold the game. The fact that Xbox’s dominant competitor has so far refused to accept Xbox’s proposal does not justify blocking a transaction that will benefit consumers.” .

Microsoft said that after spending nearly a year investigating the deal and examining millions of documents from Activision Blizzard and Microsoft, the FTC has shown no evidence that Microsoft is looking to pull the series of games from PlayStation. Ensuring games are widely available is good for Microsoft’s business, the company said.

In its own response to the FTC’s lawsuit, Activision Blizzard said that “if Xbox withheld Call of Duty from Sony’s PlayStation or other platforms that compete with Xbox, Xbox would immediately forfeit billions of dollars in lost game sales and would carve out a massive chunk of gaming. It captures what Activision has worked so hard to attract and retain.”

Outside the US, Brazil gave the go-ahead for the deal to go ahead, while the UK was reviewing it.

Activision Blizzard and Microsoft rejected the FTC’s claims.

The FTC said in its lawsuit that Microsoft had promised the European Commission that it would not have a motive to prevent people from playing games from ZeniMax, a game publisher Microsoft acquired in 2021, on consoles other than the Xbox, but after receiving approval for the ZeniMax Agreement from the European Commission, the company said it would make some exclusive ZeniMax games.

“The European Commission agrees that it was not misled, publicly stating the day after the complaint that Microsoft made no ‘engagement’ with the European Commission,” Microsoft said, “nor did the European Commission” rely on no statement made by Microsoft regarding the future distribution strategy for ZeniMax games.

The case will go before FTC Administrative Law Judge Michael Chappell. Activision Blizzard and Microsoft said the FTC’s proceedings violate their right to due process under the Fifth Amendment to the US Constitution.

Activision Blizzard said in its filing that the FTC “invented relevant product markets with high scrutiny, including a ‘high-performance console’ market limited to Xbox and PlayStation consoles, as well as individual subscription markets to various games and cloud games in an attempt to support their conclusive theories of harm.”

The public sent more than 2,100 emails to the UK’s Competition and Markets Authority in response to a statement by the agency outlining three ways the deal could reduce competition. About 75 percent of the emails expressed support for the acquisition, the agency said Wednesday.

If the deal closes, Microsoft would be “the third-largest gaming company in the world by revenue, behind Tencent and Sony,” Spencer said at a conference the day the deal was announced.

In the months since, two groups of Activision Blizzard employees have voted to form unions. Microsoft has said it is committed to efforts that make it easier for employees to decide whether to join or start a union.

“There is no reasonable and legitimate reason for our transaction to be prevented from closing,” Activision Blizzard CEO Bobby Kotick said in a statement sent to CNBC. “Our industry has huge competition and few barriers to entry. We’ve seen more devices than ever before that allow players a wide range of options to play. Engines and tools are freely available to developers, big and small. The breadth of distribution options for games . . . has never been so widespread. We believe we will prevail on the merits.”

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