Full statement on FTC on their intention to sue to block Microsoft’s acquisition of Activision Blizzard

Full statement on FTC on their intention to sue to block Microsoft’s acquisition of Activision Blizzard. 

FTC states Microsoft bought Bethesda then decided to make Bethesda games exclusive…and states they could do it again with Activision Blizzard titles.

The FTC has filed a legal challenge to try and block Microsoft’s plan to buy Activision Blizzard for $68.7 billion, according to a press release from the regulator. The lawsuit was filed today after weeks of back and forth between Microsoft, Sony, and regulators over competition concerns and the future of Call of Duty. The FTC argues that the acquisition would “enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.”

The vote from the FTC commissioners today means Microsoft now faces significant hurdles to getting its Activision Blizzard deal complete. Regulators in the UK and EU are also scrutinizing the deal closely, despite Microsoft’s repeated attempts to appease regulators.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” Holly Vedova, director of the FTC’s Bureau of Competition, said in a statement. “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.”

“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Brad Smith, Microsoft’s vice chair and president, said in a statement to The Verge. “We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.”

The company’s corporate vice president of communications, Frank X. Shaw, also tweeted a link to a document titled: “Get The Facts: How Microsoft is Committed to Growing Gaming Communities.”

In a letter to Activision Blizzard employees, CEO Bobby Kotick told staff that he wants to “reinforce my confidence” that the acquisition will close. “The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” he said. The company also posted an internal email penned by Jeb Boatman, Activision’s SVP of litigation, regulatory, and public policy law, outlining its position on the deal.

Microsoft offered Sony a 10-year deal on new Call of Duty games last month, but Sony hasn’t yet accepted the offer. A similar deal was agreed upon between Nintendo and Valve, though. It could see Call of Duty heading to Nintendo consoles if the Activision Blizzard deal is approved.

Microsoft’s frustrations over Sony’s objections to its Activision Blizzard deal have been clear. “Sony has emerged as the loudest objector,” said Microsoft president Brad Smith in a Wall Street Journal op-ed recently. “It’s as excited about this deal as Blockbuster was about the rise of Netflix.” Microsoft also described the UK’s Competition and Markets Authority (CMA) concerns as “misplaced” and accused the regulator of adopting “Sony’s complaints without considering the potential harm to consumers.”

Microsoft has also accused Sony of paying developers to keep their content off of its Xbox Game Pass service, and Sony has even argued that Microsoft’s Activision Blizzard acquisition could “hurt developers and lead to price rises.”

In a news release, the FTC said that Microsoft has a record of “acquiring and using valuable gaming content to suppress competition from rival consoles,” pointing to the company’s $7.5 billion acquisition of ZeniMax Media, the parent company of Bethesda Softworks. The FTC noted Microsoft’s plan to keep next year’s Starfield from Bethesda Game Studios and Redfall from Arkane as Microsoft exclusives. Those games will be available on Xbox platforms and Windows PC, and the company’s Game Pass subscription service.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, director of the FTC’s Bureau of Competition, in a news release. “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 points to the Xbox Series S and Series X as “one of only two types of high performance video game consoles” on the market — the other, Sony’s PlayStation 5, is not mentioned in its statement. The commission also points to Microsoft’s Game Pass service as another cornerstone of the company’s gaming business, for which Sony and other console competitors do not have an equivalent.

The commission also notes that Activision Blizzard is “one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices.” The publisher controls a wide number of properties, including Call of Duty, Warcraft, Overwatch, and Diablo. The proposed deal would also include mobile gaming giant King, which Activision Blizzard owns.

“With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers,” the FTC said.

Microsoft’s Phil Spencer, head of Xbox, has said that his company plans to keep multiplatform games like Call of Duty on all existing platforms, including PlayStation, after Microsoft’s acquisition of Activision Blizzard would conceivably close. In recent months, Spencer has pointed to the example of Minecraft, which Microsoft acquired in 2014 for $2.5 billion, which remains on a variety of non-Xbox devices. Spencer and Microsoft have committed publicly to bringing Call of Duty specifically to PlayStation and Nintendo devices for at least another 10 years.

But the FTC pointed to Microsoft’s assurances to European antitrust authorities and regulators being in conflict with its decision to bring Bethesda Softworks’ games exclusively to Xbox and PC — and to Game Pass — next year.

“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Microsoft’s vice chair and president Brad Smith said in response to the FTC’s action. “We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.”

“The FTC’s job is to protect consumers, not competitors,” said Lulu Cheng Meservey, executive vice president of corporate affairs and chief communication officer at Activision Blizzard. “This vote departs from precedent but the law hasn’t changed. Any claim the deal is anticompetitive ignores facts; the deal benefits gamers and the industry, especially given competition from abroad. We look forward to proving our case in court and closing our deal with Microsoft.”

“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Brad Smith, Microsoft’s president, said in a statement Thursday. “We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.”

In an email sent to employees and provided to CNN, Activision CEO Bobby Kotick said the FTC suit may sound “alarming” but he remains confident the deal will close. “The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” he said.

The US merger challenge reflects the biggest setback yet for Microsoft as it has aggressively courted regulators around the world in hopes of persuading them to bless the deal. It also marks the FTC’s most significant challenge to the tech industry since it sued to break up Facebook-owner Meta in 2020, underscoring US officials’ vocal promises of a tough antitrust enforcement agenda.

“This is the boldest move the Biden administration has made so far to police mergers involving Big Tech and to expand the realm of merger enforcement,” said William Kovacic, a law professor at George Washington University and a former FTC chairman. “More than anything else they’ve done, this embodies their commitment to get tough on mergers.”

The case could also mark a turning point for how regulators and the courts review proposed deals, at a time when US antitrust enforcers have intentionally brought difficult cases to test the law and to keep up with advances in technology.

Microsoft’s proposed deal would give it control over key video game franchises, including “Call of Duty,” “World of Warcraft” and more. That could give it enormous influence over the future of a multibillion-dollar industry, the FTC said.

“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,” said Holly Vedova, director of the FTC’s Bureau of Competition, in a statement.

Officials in the United Kingdom and the European Union have also scrutinized the deal as potentially anticompetitive. But the FTC complaint marks the first attempt by an antitrust regulator to block the deal outright.

Microsoft could use its ownership over Activision titles to raise prices, or to try to funnel players to gaming platforms it controls, such as Xbox or Windows, the FTC said. The deal could also affect the emerging market for cloud-based gaming services, the FTC said, which Microsoft is involved with through its subscription service, Xbox Game Pass.

In recent days, Microsoft has announced a slew of partnerships apparently intended to head off claims that it would withhold gaming content from rivals. This week, Microsoft said it had reached a 10-year deal with Nintendo ensuring that it will have access to Call of Duty for the foreseeable future.

In a Wall Street Journal op-ed Monday, Microsoft’s Smith said an FTC suit to block the Activision deal would be a “huge mistake” and added that the acquisition would allow Microsoft to innovate new features such as the ability for consumer to play the same game on multiple devices, just as they can with streaming TV shows or music.