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Activision Blizzard’s acquisition by Microsoft may be thwarted by this lawsuit

The FTC is suing to prevent the Microsoft acquisition of Activision Blizzard.

A press release issued by the US watchdog (opens in new tab) claims that Microsoft’s proposed acquisition of the Call of Duty publisher “would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.” Microsoft announced its intention to acquire Activision Blizzard back in January.

The combination would “significantly decrease competition or tend to create a monopoly in several areas,” as stated in the redacted complaint (opens in new tab), which might give Microsoft a leg up in those industries.

Specifically, the FTC is concerned that Microsoft would have “greater motivation to leverage [its] control of Activision titles to disadvantage Microsoft’s competitors,” and that Microsoft will have the ability to influence markets via modifying Activision’s pricing points in the long run. Already for 2023, Microsoft has stated that Xbox-exclusive games would cost more.

The lawsuit is a major roadblock in Microsoft’s attempt to acquire Activision Blizzard and might ultimately lead to the deal falling through.

A great deal of drama

Microsoft has been more frivolous with its money as of late, with their bid of US$68.7 billion for the Call of Duty publisher being merely the tip of the iceberg. The FTC has filed a lawsuit over Microsoft’s planned acquisition of Activision Blizzard, citing the company’s prior acquisitions as a reason for worry.

To paraphrase the complaint: “Microsoft’s prior conduct gives a preview of the merged firm’s anticipated plans if it consummates the Proposed Acquisition [of Activision-Blizzard],” regardless of whatever assurances the corporation may make regarding its ambitions.

For instance, it bought out ZeniMax, the parent company of the AAA studio Bethesda. The FTC brings up Microsoft’s assurances to the European Commission (EC) that they “would not have the motivation to restrict ZeniMax titles from competitor platforms,” notwithstanding the contentious nature of the acquisition.

Soon after the EC approved the deal, Microsoft announced that it would be making exclusive versions of some of the ZeniMax games it had just acquired.

Consequently, the forthcoming titles from the studio will not be launching on competitor platforms the PS5 or Nintendo Switch, despite Microsoft’s guarantees to the EC and the need for Starfield to be a platform seller as the first Bethesda creation under Microsoft.

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Joint effort

The president of Microsoft, Brad Smith, has publicly replied to the suit on Twitter (opens in new tab), addressing the FTC’s worries about Microsoft’s possible use of the merger as a major market disruptor that may shut off its competitors at the source.

The first part of his response states, “We continue to think that our agreement to purchase Activision Blizzard would enhance competition and generate more possibilities for gamers and game developers.”

Smith later tweeted, “While we believe in giving peace a chance, we have total confidence in our case and appreciate the opportunity to present it in court”.

CEO Bobby Kotick recently issued a letter to staff addressing some of the charges stated in the litigation, and Activision Blizzard has also publicly reacted to the suit.

Kotick, echoing Smith’s stance, adds, “I want to underscore my confidence that this merger will conclude.” The claim that this transaction would harm competition is at odds with the facts, therefore we’re confident in our ability to prevail in court.

Kotick then looks to make an oblique statement to the FTC, giving his blessing to the merger:

In spite of the regulatory climate being dominated by ideology and misinformation about the tech industry, “we believe these arguments will triumph.”

All in it together

In a public response on Twitter, Microsoft president Brad Smith addressed the FTC’s fears that Microsoft would use the merger as a big market disruptor to shut off their competitors at the source.

His first response says, “We continue to think that our agreement to purchase Activision Blizzard would enhance competition and generate more possibilities for fans and game developers.”

With a follow-up Tweet, Smith said, “While we believe in giving peace a chance, we have total confidence in our case and welcome the opportunity to present it in court”.

Bobby Kotick, CEO of Activision Blizzard, has publicly replied to the litigation by writing a letter to workers (opens in new tab) in which he addresses some of the charges contained in the lawsuit.

Reiterating Smith’s view, Kotick said, “I want to underscore my confidence that this deal will conclude.” We expect to prevail in court because the claim that this acquisition would harm competition is unsupported by the evidence.

Then, Kotick seems to be implicitly addressing the FTC to express his support for the merger:

Despite the current regulatory climate, which is driven by ideology and common misunderstandings of the technology sector, “we believe these arguments will succeed.”