FTC Opposes Microsoft-Activision Acquisition

On Thursday, the Federal Trade Commission filed an antitrust case against Microsoft, claiming that it violates US law by attempting to acquire video game publisher Activision Blizzard. Microsoft has a record, including with its 2021 ZeniMax deal, of acquiring games and utilizing these acquisitions to suppress competition from competitors who make consoles.

Background: Microsoft’s Attempt to Acquire Activision Blizzard

Microsoft announced its intention to acquire Activision Blizzard for $68.7 billion in January, with the goal of closing the deal by June 2023. The deal has been under pressure from Microsoft’s competitors in gaming, such as Sony. Microsoft has repeatedly reiterated that they won’t become the world’s leader in gaming if the deal closes, and they promise to provide popular “Call of Duty” games on gaming platforms other than those owned by Microsoft.

What is the FTC’s Position on the Acquisition?

The FTC claims that by gaining control of Activision’s content, Microsoft will have the power to withhold or degrade Activision’s content in ways that substantially lessen competition by leveraging its power to influence product quality, price, and innovation. The organization also believes that such loss of competition would likely result in significant harm to consumers in multiple markets at a crucial time for the industry.

The FTC Complaint Against Microsoft

FTC commissioners voted 3-1 to move forward with the agency’s administrative complaint, which will be presented before the FTC’s internal administrative law judge. In that process, the ALJ makes an initial decision after a trial-like proceeding. After that process, the respondent or FTC staff serving as “complaint counsel” can choose to appeal the initial decision to the full commission for a vote. After that, the respondent could still ask a federal appeals court to review the commission’s order.

Why Has the Deal Come Under Scrutiny?

The deal has come under scrutiny from Microsoft’s competitors in gaming such as Sony. It is unlikely that many consumers will be willing to pay $68.7 billion to purchase the headset right out of the gate, although diehard Apple fans will doubtless line up to buy theirs. According to IDC, Meta controls 80% of the global headset market. Meta CEO Mark Zuckerberg, meanwhile, doesn’t seem too concerned about Apple’s headset and has been brushing off Apple’s offering, saying it doesn’t cheer a vision of the future he wants to participate in.

Microsoft’s Response to FTC’s Complaint Against it

The software giant has vowed to proceed with the acquisition, reiterating that it would improve competition and create more opportunities for gamers and game developers. Microsoft has been committed from the beginning to address concerns about competition, including offering proposed concessions to the FTC. However, the company still welcomes the opportunity to present its case in court and has complete faith in its case.

Conclusion

The Federal Trade Commission’s antitrust case against Microsoft aims to prevent the software giant from acquiring video game publisher Activision Blizzard, citing its record of using acquisitions to suppress competition from other console makers. The FTC claims that the acquisition will give Microsoft the power to control Activision’s content and substantially limit competition. The internal administrative law judge at the FTC will review the case. Microsoft, on the other hand, retains faith in its case and would welcome the opportunity to present it in court.

FAQs

1) Why did Microsoft seek to acquire Activision Blizzard?

Microsoft aimed to acquire Activision Blizzard to become the leader in gaming, further improving competition and creating more opportunities for gamers and game developers.

2) What power would Microsoft possess if it acquired Activision?

The FTC claims that by obtaining control of Activision’s content, Microsoft will have the power to withhold or degrade Activision’s content and manipulate product quality, price, and innovation, adversely affecting competition.

3) What happens after the administrative complaint is presented before the ALJ?

The ALJ makes an initial decision after the trial-like proceeding. After that process, the respondent or FTC staff serving as “complaint counsel” can choose to appeal the initial decision to the full commission for a vote. The respondent could still ask a federal appeals court to review the commission’s order.

4) Is this Microsoft’s first antitrust case?

No, in 1998, the US Justice Department filed a broad antitrust case against Microsoft. Microsoft modified some practices related to its Windows operating system business as a result.

5) Why are regulators in the UK also looking into the Activision Blizzard acquisition?

Regulators in the UK are investigating whether the acquisition of Activision Blizzard would decrease competition in the country.