Xbox Activision FTC trial begins: What You Need to Know
A federal court trial over Microsoft’s plan to acquire the video game maker Activision Blizzard for nearly $70 billion began on Wednesday, pitting some of the world’s most powerful companies against an antitrust regulator with a growing reputation for blocking mergers.
Background:
This case could be one of the biggest antitrust challenges in years, concerning whether the Trump administration allowed corporations to grow too big by approving too many mergers without enough scrutiny. Activision Blizzard, the maker of Call of Duty and World of Warcraft video games, has faced allegations of sexual harassment and mistreatment of Black coworkers, while Microsoft has been accused of monopolistic practices in the technology sector.
The Xbox Activision Deal:
What the deal entails
Microsoft announced that it would acquire Activision in a USD $68.7 billion deal that would bring together two of the video game industry’s most prominent names, creating a massive tech company in the process. The deal includes a $14.1 billion cash offer and Microsoft also said it would assume approximately $8.5 billion in Activision Blizzard net debt.
The rivalry between Sony and Microsoft
The Xbox brand and the PlayStation brand have been at odds since the beginning, with both sides vying for video game dominance, but Microsoft’s acquisition of Activision has the potential to upend the balance of power. Sony currently has access to a number of third-party exclusives from Activision, including Call of Duty. Should the deal go through, Microsoft would be able to put all of Activision’s properties, including Call of Duty, on Xbox Game Pass and other Xbox platforms.
The FTC and the Xbox Activision Deal:
US antitrust regulators are concerned Microsoft’s Activision purchase will reduce competition in the gaming industry
The case is being heard by Judge Yvonne Gonzalez Rogers of the Northern District of California. It is the biggest deal to go against the FTC since the landmark lawsuit against AT&T in 2018. The prosecution claims that the scale of the acquisition will create a vertical monopoly capable of imposing supracompetitive prices and restrict consumer choice. The FTC alleges that Microsoft’s purchase could increase console prices and lead to consumers paying more for video games. The Federal Trade Commission (FTC) voted to approve legal action to block the acquisition of Activision Blizzard by Microsoft.
Why the FTC opposed the merger
The FTC commented in a December news release that the proposed merger would eliminate the substantial competition between Activision and Microsoft and increase concentration in the video game platform market. The agency noted that the industry is already highly concentrated, with Microsoft and Sony controlling most of the video game console sales.
The Trial:
Arguments presented by the prosecution and defense
The prosecution argued that the acquisition of Activision Blizzard by Microsoft would have a negative impact on competition in the video game market. The defense argued that the transaction does not raise concerns under antitrust law and that it would benefit video game players by delivering better and cheaper games.
The hearing is expected to last for several weeks
The trial will include testimony from executives from both firms, as well as expert witnesses, and the deadline for the judge’s decision is mid-April. The judge will need to decide whether the merger would be anti-competitive and if it is, what remedies should be followed for approval.
Conclusion:
The US Federal Trade Commission’s legal challenge to Microsoft’s proposed acquisition of Activision marks a major setback for the tech giant as it seeks to extend its influence beyond the office and into the home. However, it is also an interesting test of antitrust law that could set a precedent for future mergers and acquisitions in the tech industry.
FAQs:
1. What is the Activision Blizzard merger?
The Activision Blizzard merger is a proposed acquisition of the video game publisher by Microsoft for a price of $68.7 billion. The two companies are currently in a legal battle with the Federal Trade Commission over whether the deal would limit competition in the video game market.
2. How will the merger impact the video game market?
Should the merger go through, Microsoft would have a greater hold over the video game market and could potentially raise prices for consumers. The acquisition would also reportedly give Microsoft more power over third-party games developed by Activision Blizzard and associated developers.
3. What’s at stake for both Microsoft and the video game market?
The acquisition will allow Microsoft to expand its gaming business significantly and make it a more formidable competitor to Sony. For the video game market, merging two of the largest companies will limit competition and could result in higher prices for consumers.
4. When will a final decision be made on the merger?
The trial is expected to last for several weeks, and the deadline for the judge’s decision is mid-April.
5. What could be the possible implications for video game players?
If Microsoft is successful in acquiring Activision Blizzard, it could have significant implications for video game players. Microsoft could potentially use its newfound control to limit exclusive game releases, and increase prices of video games, while Sony may need to look elsewhere for future third-party exclusives.