FTC sues to block Microsoft’s acquisition of gaming giant Activision

The case signals a broader strategy by the agency to pursue deals that could pose competitive threats in the future, especially in nascent gaming markets. The lawsuit was filed the same day a lawsuit began in San Jose in an FTC lawsuit against Facebook parent company Meta over its acquisition of virtual reality company Within. The agency argued that if the companies could stay separate, they would push each other to develop more features and attract more users, which would benefit competition in the future.

The FTC’s lawsuit against Microsoft could thwart the company’s ambitions to become a heavier hitter in gaming frontiers. Activision owns popular titles such as “Candy Crush” and “Call of Duty,” and its acquisition could strengthen Microsoft in its competition with Japanese console manufacturers Nintendo and Sony.

The commission voted Thursday on a party-line vote to initiate the lawsuit in administrative court, with all three Democrats in favor of the complaint and one Republican against.

Microsoft hasn’t seen such a severe regulatory threat to its business in more than two decades, when the Justice Department filed a landmark antitrust lawsuit against the company that has ensnared it through years of battles. legal.

After the case was settled in 2002, Microsoft had largely avoided antitrust scrutiny focused on tech rivals including Facebook, Google, Apple and Amazon until the proposed acquisition of Activision, the biggest deal in history. from Microsoft. (Amazon founder Jeff Bezos owns The Washington Post).

Trustbusters bypass the biggest tech company of them all

Microsoft President Brad Smith has indicated the company will fight the lawsuit, saying in a statement that the company has been “committed from day one to resolving competition issues.”

“While we believe in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court,” Smith said.

Since announcing its intention to buy Activision in January, Microsoft has announced policies and arrangements intended to show regulators that the deal would not give it an unfair advantage in the gaming market or harm workers. . On Tuesday, when it was apparent the agency was close to making a decision on the deal, Microsoft announced that it would be bringing the Call of Duty franchise to Xbox rival Nintendo Switch. He previously said he would make Call of Duty available on rival Sony’s PlayStation.

The FTC decided to block the deal a day after Microsoft staff met with agency officials to discuss the lawsuit, according to a person familiar with the meeting, who spoke on condition of anonymity to discuss a private meeting. Smith said the company offered “proposed concessions” to the agency earlier this week.

Activision makes its popular games available to 154 million monthly active users worldwide on a variety of video game consoles, computers, phones and tablets, according to an FTC press release on the complaint. . But the FTC alleges that if the deal were to go through, that could change. Microsoft would have the ability to thwart competitors by withholding these games from competing game systems entirely, or by manipulating the prices and degrading the quality of games on rival consoles.

The lawsuit warns that the deal could not only give Microsoft an advantage in consoles, but also an unfair advantage in more nascent games, such as subscription games and cloud games, according to an FTC official who s spoke on condition of anonymity to discuss the agency’s argument. The FTC argues that this deal could stifle innovation in these more nascent gaming markets, the person said.

Microsoft’s Xbox gaming business earned $3.6 billion in the quarter ending September. Xbox consoles trail rival Japanese console makers Sony and Nintendo in terms of sales, the company told a UK competition regulator in October. Microsoft has a history of acquiring game content and then using it to crush competition from rival console makers, according to the FTC. The agency cited Microsoft’s acquisition of game developer ZeniMax, and says the company’s subsidiary has made titles such as “Starfield” and “Redfall” exclusive to Microsoft devices despite previous assurances to European regulators.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” Holly Vedova, director of the FTC’s Competition Bureau, said in a press release. “Today, we seek to prevent Microsoft from taking control of a leading independent game studio and using it to harm competition in several dynamic and fast-growing game markets.”

The European Union announced last month that it had opened an investigation into the deal, warning that Microsoft “may ban access” to Activision’s games.