Microsoft is headed for a battle with the Federal Trade Commission over whether the US will block the tech giant’s planned acquisition of video game company Activision Blizzard.
Microsoft on Thursday filed a formal response to the FTC’s claims that the $68.7 billion deal is an illegal takeover that should be stopped.
After years of avoiding political backlash aimed at big tech peers like Amazon and Google, the software giant now appears to be on a collision course with US regulators, emboldened by President Joe Biden’s push to crack down on anti-competitive behavior.
The FTC claims the merger could violate antitrust laws by stifling competitors for Microsoft’s Xbox game console and 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 such as the 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-party game console manufacturer” behind Sony and Nintendo, and one of the few publishers of popular video games with “almost no presence in mobile devices”. gaming’, where it tries to make a profit.
Activision Blizzard filed its own rebuttal to the FTC complaint on Thursday, criticizing what it described as the FTC’s “unfounded assumption” that Microsoft would want to withhold Call of Duty from platforms that compete with Xbox. The CEO Bobby Kotick said he believes the companies will prevail.
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 to 1 earlier in December to file the complaint to block the deal, with Khan and the two other Democratic commissioners voting in favor and the only Republicans voting against.
The deal is also being closely monitored in the European Union and the United Kingdom, where investigations will not be completed until next year.
The FTC’s 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 a number of upcoming game titles exclusive to Xbox, despite having European regulators assured that it 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 “approach exclusivity for future game titles on a case-by-case basis, which is exactly what it has done.”
The FTC’s suit describes top-selling franchises like Call of Duty as important because they develop a base of loyal users connected to their favorite console or streaming service.
“With control of Activision’s content, Microsoft would have the ability and greater incentive to withhold or downgrade Activision’s content in a manner that significantly reduces competition – including competition in product quality, price and innovation.” the FTC lawsuit said. “This loss of competition would likely result in significant harm to consumers in multiple markets at a critical time for the industry.”
Microsoft indicated it will vigorously challenge the case in court with a team led by high-profile corporate attorney Beth Wilkinson, while also leaving open the possibility of a settlement.
“Even with confidence in our cause, we remain committed to creative solutions with regulators that will protect competition, consumers and workers in the tech industry,” Microsoft president Brad Smith said in a statement Thursday. “As we have learned from our past litigation, the door never closes on the possibility of finding an agreement that benefits everyone.”
Microsoft’s last major antitrust battle came more than two decades ago, when a federal judge ordered its dissolution following the company’s anti-competitive actions against its dominant Windows software. That verdict was overturned on appeal, although the court imposed other penalties on the company.
The FTC’s decision to forward the complaint to its internal administrative law judge D. Michael Chappell instead of seeking an urgent federal court order to halt the merger could drag the case on at least until August, when the first evidence hearing is scheduled. Microsoft’s deal with Activision Blizzard requires it to pay the video game company a severance payment of up to $3 billion if it can’t close the deal by July 18.
The timing and trajectory of the case could change depending on how regulators in the UK and Europe decide on the merger next year. If Microsoft gets approval in Europe, it could use that 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 suit in a San Francisco federal court to stop the deal on antitrust grounds.
The plaintiffs, all fans of Activision Blizzard’s Call of Duty franchise and other popular titles such as News18.com/world/”>World of Warcraft, Overwatch and Diablo, are particularly concerned about how the consolidation would affect future game quality, innovation and output, their attorney Joseph Alioto said.
“If there’s a lack of competition, quality necessarily declines,” Alioto said. “By taking out Activision, it puts Microsoft in such a strong position that they can do whatever they want.”
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(This story has not been edited by News18 staff and was published from a syndicated news agency feed)