The Federal Trade Commission (FTC) he is suing to block Microsoft’s massive $69 billion acquisition of gaming giant Activision Blizzard, saying it will hurt competition in the gaming market.
The move is the FTC chair Lina Khan’s eldest against a Big Tech company in his one-and-a-half-year term. Since Khan surprise date to chair the Consumer and Competition Agency in June 2021, many waited to see which Big Tech Khan merger would follow, believing it wasn’t about blocking a merger, but when and which one.
The deal will be followed closely by media and tech companies who would like to acquire smaller players, but have wondered how aggressive the Biden administration would be about this mega merger. Biden’s Justice Department already has stopped a much smaller merger this fall, successfully suing to prevent book publisher Random House from buying rival Simon & Schuster.
Microsoft managed to avoid most of the scrutiny and criticism his Big Tech peers have endured in recent years, and there was a sense that he had already done his math and learned his lesson in the late 1990s and early 2000s , when an antitrust lawsuit by the Justice Department nearly dissolved the company. Then Microsoft decided to make the biggest acquisition in its history and the history of gaming in general and it became impossible to ignore.
The FTC lawsuit finds that Microsoft has a proven track record of buying game companies and making some of their titles exclusively for Microsoft platforms, including the Xbox console and Game Pass, its subscription streaming service games. He argues that Activision makes some of the most popular games in the world and that Microsoft could make them more expensive or harder, if not impossible, to play on competing platforms.
“Microsoft has already demonstrated that it can and will hide content from its gaming rivals,” Holly Widow, director of the agency’s competition office, said in a statement. “Today we seek to prevent Microsoft from gaining control of a leading independent game studio and using it to harm competition in multiple fast-growing and dynamic gaming markets.”
For its part, Microsoft says the acquisition will improve competition and be great for consumers, a line its chairman, Brad Smith, reiterated today in response to the lawsuit.
“We continue to believe our agreement to acquire Activision Blizzard will broaden the competition and create more opportunities for gamers and game developers,” Smith tweeted. He added that Microsoft tried to make concessions to the FTC to avoid a lawsuit, which his company intends to fight and believes it will win.
Smith and Microsoft have been increasingly vocal about the various peace deals they’ve rolled out to appease Washington, most of them centered around Call of Duty, Activision’s blockbuster game franchise. The company has repeatedly said it would continue to license Call of Duty to other platforms, most notably Sony, which also has a game console with exclusive game licenses. And this week, Microsoft announced a plan to bring Call of Duty to Nintendo’s Switch consoles.
Microsoft has a basic rationale in its favor when it comes to Call of Duty: it would be massively expensive if it cut off a huge chunk of the game’s user base after buying it. Which is the same reason AT&T didn’t stop other distributors from selling HBO subscriptions when the telecommunications company owned what used to be called WarnerMedia.
But in Press release In announcing the move, the FTC focused on Microsoft’s track record with Bethesda, a game developer it acquired for $7.5 billion in 2021. “Microsoft has decided to make many of Bethesda’s titles, including Starfield And Redfall Microsoft exclusives despite assurances given to European antitrust authorities that it has no incentive to reject games from rival consoles,” the FTC said.
This isn’t the FTC’s only battle with big tech. The agency inherited and then he resumed the Trump administration’s antitrust lawsuit against Metaand then created a new fight with the same company by trying to block Meta’s acquisition of a virtual reality game developer last July (the trial Start on Thursday). But while Khan is best known for her criticisms of Amazon, the FTC took no action against Amazon’s $8.5 billion merger with MGM.
Given the agency’s limited resources, Khan must pick his battles. Microsoft and a $69 billion merger is about as big a battle as it sounds.
Peter Kafka contributed to the writing of this article.
FTC Chair Lina Khan testifies at a congressional hearing in May 2022. Tom Williams/CQ-Roll Call, Inc via Getty Images
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