The Federal Trade Commission on Thursday sued Microsoft to block its $69 billion acquisition of video game giant Activision Blizzard, saying it could stifle competitors to Microsoft’s Xbox game console. and its growing sports subscription business.
The FTC’s challenge to President Joe Biden’s order to investigate big tech mergers could be a test case. The commission voted 3-1 to issue the complaint after a closed-door meeting, with three Democratic commissioners voting in favor and one Republican against.
The complaint points to Microsoft’s previous game acquisitions, notably well-known developer Bethesda Softworks and its parent company Zenimax, as developing some upcoming game titles exclusively for Xbox, despite Microsoft assuring European regulators it had no intention of doing so.
“Microsoft has already demonstrated that it can and will stop content from its gaming competitors,” said a prepared statement by Holly Vedova, director of the FTC’s Bureau of Competition. “Today we want to prevent Microsoft from gaining control over a leading independent game studio and using it to harm competition in several dynamic and fast-growing gaming markets..”
The FTC said it would file the complaint through its administrative process rather than take the case to federal court. According to the complaint, an administrative law judge began hearing that evidence, but not until August 2023.
Microsoft Chairman Brad Smith signaled in a statement Thursday that the company may challenge the FTC’s action.
“While we hope to give peace a chance, we remain confident in our case and welcome the opportunity to present our case in court,” Smith said.
As the company awaited the decision, it had been improving the public security of the deal in recent days. Smith said Microsoft is committed to addressing competition concerns and brought proposed offers to the FTC earlier this week.
“We continue to believe this agreement will expand competition and create more opportunities for gamers and game developers,” Smith said.
Microsoft announced the merger agreement In January, however, it faced months of opposition from Sony, which makes a competing PlayStation console and has raised concerns with antitrust watchers. All over the world about losing access to popular Activision Blizzard game franchises like the military shooter game Call of Duty.
Antitrust regulators under Biden have “considered merger policy to be too weak for decades, and they’ve repeatedly said, ‘We’re changing it,'” said William Kovacic, a former chairman of the FTC.
In 2006, then-President George W. Kovacic, a Republican commissioner appointed by Bush, has pressed the FTC to make bold promises to “not allow bad deals and not accept weak solutions.” But he said Microsoft has a good chance of winning its legal challenge.
“It’s clear that the company is making a lot of concessions,” he said. “Microsoft can take them up in court and say the FTC is adamant about this.”
Microsoft announced its latest promise on Wednesday, saying it will bring Call of Duty to Nintendo Equipment should be acquired for 10 years. It said it tried to give Sony the same assurance.
In an appeal to Biden administration priorities, Microsoft sought to characterize its deal as worker-friendly, after announcing a “labor neutral agreement” with the Communications Workers of America in June that would allow workers to unionize once the acquisition is complete. The union’s president, Chris Shelton, wrote an opinion piece in The Hill this week calling on the FTC to “seal the deal, not blow it up.”
The deal is also under close scrutiny in the European Union and the United Kingdom, where investigations are not expected to conclude until next year.
The FTC’s decision to send the complaint to its own internal judge instead of seeking an emergency federal court injunction to block the merger could drag out the case by months and “give more credence to authorities outside the United States to swing their deal. own,” said Kovacic, now a professor at George Washington University Law School.
Activision Blizzard CEO Bobby Kotick said in a message to employees on Thursday that the FTC’s action “sounds terrible, so I want to reinforce the hope that this deal will go through.”
“The allegation that the deal is anti-competitive is inconsistent with the facts, and we are confident that we will win this challenge,” Kodic wrote.
Kodick said the deal will be good for players, staff, the competition and the industry.
“We believe these arguments will prevail despite a regulatory environment focused on ideology and misconceptions about the technology industry,” he said.
Chaired by FTC Chairman Lina KhanA legal scholar who has advocated for tougher antitrust enforcement, the commission was made up of three Democrats and one Republican earlier this year after a second Republican withdrew, leaving an open seat on the board.
Democratic US Senate. Elizabeth Warren tweeted Thursday that she welcomed the FTC action, noting that it had urged Khan to investigate the proposed merger.
“Corporate monopolies have free rein to raise prices and hurt workers, but now the Biden administration is committed to promoting competition,” Warren said.
This year both the Justice Department and the FTC have looked at strengthening merger guidelines to better detect and prevent illegal and anticompetitive agreements.
Federal regulators also launched their campaign on Thursday In a San Jose, California, courtroom on Thursday to block Facebook’s takeover of parent Meta, a virtual-reality company.
In that case, the FTC sued to block the acquisition of Meta’s Unlimited and its fitness app Supernatural, asserting that it would harm competition and violate antitrust laws.
In recent years Microsoft has largely escaped the more serious regulatory backlash of its tech rivals Amazon, Google and Meta. But the sheer size of Activision’s Blizzard acquisition — which may be the most expensive in tech industry history — has drawn attention.
Microsoft’s Last Great Hopeless Battle Two decades ago, a federal judge ordered it broken up following the company’s anticompetitive practices related to its dominant Windows software. That ruling was overturned on appeal, although the court imposed other, less severe, penalties on the company.