FTC sues to block $69B Microsoft-Activision Blizzard merger

The U.S. Federal Trade Commission sued on Thursday to block Microsoft’s planned $69 billion acquisition of video game company Activision Blizzard, saying it could crush rivals to Microsoft’s Xbox console and its growing gaming subscription business.

The FTC challenge could be a test case for President Joe Biden’s mandate to review large tech mergers. The committee voted 3-1 to approve the complaint after a closed session, with three Democratic commissioners voting in favor and the lone Republican commissioner voting against.

The complaint points to Microsoft’s previous game acquisitions, notably high-profile developer Bethesda Softworks and its parent company ZeniMax, as an example of how Microsoft is working on some upcoming Xbox exclusives, despite assuring European regulators that it has no intention of doing so.

“Microsoft has demonstrated that it can and will withhold content from its gaming competitors,” Holly Vidova, director of the FTC’s Competition Bureau, said in a prepared statement. Control of a leading independent game studio and use it to harm competition in multiple dynamic and fast-growing game markets

The FTC said it was filing the complaint through an administrative process rather than taking the case to federal court. An administrative law judge ordered it to hear evidence, but not until August 2023, the complaint said.

Microsoft President Brad Smith said in a statement Thursday that the company may challenge the FTC’s action.

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

The company has been ramping up its public defense of the deal in recent days as it awaits a decision. Smith said Microsoft has been committed to addressing competition issues and proposed concessions to the FTC earlier this week.

“We continue to believe this deal will expand competition and create more opportunities for gamers and game developers,” Smith said.

Microsoft announces merger deal in January, but faced months of resistance from Sony, which built a competing PlayStation console and sparked concerns from antitrust regulators There is talk around the world of losing the rights to popular Activision Blizzard game franchises, such as the military shooter Call of Duty.

William Kovacic, former chairman of the FTC, said antitrust regulators under Biden “have shown that merger policy has been too weak for decades, and they have repeatedly said, ‘We’re changing the This situation'”.

That put pressure on the FTC to live up to its bold pledge to “no dodgy deals and no weak settlements,” said Kovacic, who was founded in 2006 by then-President George W. ยท Bush-appointed Republican commissioner. But he said there was a good chance Microsoft would win the legal challenge.

“Obviously, the company has been making some concessions,” he said. “Microsoft could raise these issues in court and say the FTC is inflexible.”

Microsoft announced its latest pledge Wednesday to launch Call of Duty on Nintendo A 10-year device should pass its acquisition. It has said it is trying to make the same promise to Sony.

In calling out the Biden administration’s priorities, Microsoft also sought to portray its deal as worker-friendly after announcing in June a “labor-neutral deal” with the Communications Workers of America that would allow workers to unionize after the takeover closes . Union president Chris Shelton wrote an opinion column in The Hill this week calling on the FTC to “make a deal, not break it.”

The deal is also under scrutiny in the European Union and the United Kingdom, with investigations not expected to be completed until next year.

The FTC’s decision to take the complaint to its internal judges rather than seek an emergency injunction in federal court to halt the merger could delay the case for months and “give more confidence to authorities outside the U.S. to take action on their transactions” themselves Yes,” said Kovacic, now a professor at George Washington University School of Law.

Activision Blizzard CEO Bobby Kotick said in a message to employees on Thursday that the FTC’s action “sounds concerning, so I want to increase my confidence that this deal will close.”

“Allegations that this deal is anticompetitive are untrue, and we believe we will win this challenge,” Kotick wrote.

Kotick said the deal is good for players, staff, competition and the industry as a whole.

“While the regulatory environment focuses on ideology and misconceptions about the tech industry, we believe these arguments will prevail,” he said.

FTC Chairman Lina Khan MemberA legal scholar who advocates for stronger antitrust enforcement, the committee is made up of three Democrats and one Republican after a second Republican stepped down earlier this year and left a vacancy on the committee seats.

Democratic U.S. Senator Elizabeth Warren said on Twitter on Thursday that she welcomed the FTC’s action, noting that she had urged Khan to review the proposed merger.

“Monopolies are free to raise prices and hurt workers, but now the Biden administration is committed to promoting competition,” Warren said.

Both the Justice Department and the FTC are considering strengthening merger guidelines this year to better detect and prevent illegal and anticompetitive deals.

Federal regulators also kicked off their campaign on Thursday A court in San Jose, Calif., blocked Facebook parent Meta’s acquisition of a virtual reality company on Thursday.

In this case, the FTC sued to block Meta’s acquisition of Within Unlimited and its fitness app Supernatural, claiming it would harm competition and violate antitrust laws.

Microsoft has largely escaped the stronger regulatory backlash experienced by its tech rivals such as Amazon, Google and Meta in recent years. But the sheer size of the Activision Blizzard acquisition — possibly the most expensive acquisition in tech industry history — has raised eyebrows.

Microsoft’s Last Antitrust Battle More than two decades ago, a federal judge ordered the breakup of the company after it took anticompetitive action against its dominant Windows software. That judgment was overturned on appeal, although the court imposed other, less severe penalties against the company.

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