FTC sues to block Microsoft-Activision Blizzard $69B merger

FTC sues to block Microsoft-Activision Blizzard $69B merger thumbnail

The Federal Trade Commission sued Thursday to block Microsoft’s planned $69 trillion takeover of Activision Blizzard. It claimed that it could suppress rivals to Microsoft’s Xbox gaming console and its growing subscription business.

The FTC’s challenge could serve as a test case for President Joe Biden ”s mandate to examine big tech mergers. After a closed-door meeting, the commission voted 3-1 in favor of issuing the complaint. The three Democratic commissioners voted in favor and the single Republican voted against.

The complaint cites Microsoft’s past game acquisitions, particularly of ZeniMax parent company ZeniMax and Bethesda Softworks, as an example of how Microsoft is making upcoming games exclusive to Xbox, despite stating to European regulators that it did not intend to do so.

“Microsoft already demonstrated that it can and will withhold gaming content from its rivals,” stated Holly Vedova (director of the FTC’s Bureau of Competition). “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 said it was filing the complaint through its administrative process rather than taking the case to a federal court. The case will be heard by an administrative law judge. In a statement, Brad Smith, the president of

Microsoft, stated that the company will likely challenge the FTC decision.

“While peace is a good thing, we are confident in our case and would welcome the chance to present our case before the court,” Smith stated.

The company has been defending the deal vigorously in recent days while it waited for a decision. Smith stated that Microsoft is committed to addressing concerns about competition and presented proposed concessions to FTC earlier in the week.

” We believe that this deal will increase competition and create more opportunities to gamers and game developers,” Smith stated.

Microsoft had announced the merger deal in January, but it has been met with resistance by Sony, which makes the rival PlayStation console. This has raised concerns with antitrust watchdogs all over the world about losing access popular Activision Blizzard games such as Call of Duty.

FTC ex-chair William Kovacic said that antitrust regulators under Biden have “held out the view that merger policy has been too weak for decades and they’ve repeatedly said, ‘We are changing that.'”

This has put pressure upon the FTC to keep its bold promises to “not permit dodgy deals” and “not accept weak settlements,” stated Kovacic, a Republican commissioner who was appointed in 2006 under President George W. Bush. He said that Microsoft has a good chance to win its legal challenge.

“It is evident that the company had made a lot of concessions,” he stated. “Microsoft would likely raise them in court and say the FTC is being incorrigibly stubborn about this.”

Microsoft announced its latest promise Wednesday, saying it would make Call of Duty available on Nintendo devices for 10 years should its acquisition go through. It stated that it attempted to offer the same commitment for Sony.

Microsoft also tried to make its deal worker-friendly in an appeal to Biden’s priorities. In June, Microsoft announced a “labor neutrality” agreement with Communications Workers of America, which would allow workers to unionize once the acquisition closes. Chris Shelton, the union president, wrote this week in The Hill a column urging the FTC to “seal” the deal. The deal is also being closely scrutinized in the European Union, and the United Kingdom ,, where investigations are not expected to be complete until next year.

FTC’s decision not to seek an urgent federal court order to halt the merger but to send the complaint directly to its in-house judge could prolong the case for months and give more confidence to authorities outside the U.S. to look at the matter on their own,” said Kovacic. He is now a professor at George Washington University Law School.

Activision Blizzard CEO Bobby Kotick stated in a Thursday message to employees that the FTC’s actions “sound alarming”, and that he wanted to reassure his employees that the deal would close .”

“. “The allegation that this deal was anti-competitive is not based on the facts, and we are confident that we will win this challenge,” Kotick wrote.

Kotick stated that the deal would be beneficial for employees, players, competition, and the entire industry.

” We believe these arguments will prevail despite a regulatory environment that is dominated by ideology and misinformation about the tech industry,” he stated.

Led and chaired by Lina Khan, a legal scholar and advocate for tougher antitrust enforcement. The commission now includes three Democrats and one Republican. A second Republican, who resigned earlier this year, left an open seat.

Democratic U.S. Senator Elizabeth Warren tweeted Thursday that the FTC action was welcomed, noting that Khan had been urged to review the proposed merger.

“Corporate Monopolies have had free rein for raising prices and harming workers, but now the Biden admin has committed to promoting competition,” Warren stated.

The Justice Department and FTC have both looked at strengthening merger guidelines this year to detect and prevent illegal and uncompetitive deals. Both agencies have stressed the importance of strong competition for the economy, workers and small businesses.

Federal regulators opened their campaign Thursday to stop Facebook parent Meta from acquiring a virtual reality company in a San Jose courtroom.

The FTC filed suit to stop Meta’s acquisitions of Within Unlimited and its fitness application Supernatural. The FTC claimed that it would harm competition and violate antitrust law.

Microsoft has managed to avoid the severe regulatory backlash that its tech rivals, such as Amazon, Google, and Meta, have faced in recent years. The Activision Blizzard purchase, which could be the most expensive in tech industry history, has attracted attention.

Microsoft was involved in an antitrust battle that lasted more than 20 years ago. A federal judge ordered the company’s dissolution following anticompetitive actions relating to its dominant Windows software. Although the verdict was overturned by appeal, the court imposed other, more severe penalties on the company.

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