Microsoft on Thursday filed its response to U.S. regulators’ antitrust case attempting to dam the software maker from buying video-game publisher Activision Blizzard, saying that the deal won’t harm competition.
The Federal Trade Commission’s challenge to the proposed $68.7 billion acquisition stands out as the most important government pushback Microsoft has handled on home turf since facing off against the Justice Department 20 years ago over the dominance of Windows within the operating system market.
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Under President Donald Trump, Google’s umbrella company Alphabet, Apple, Amazon and Facebook parent Meta all faced inquiries from U.S. competition officials. That left Microsoft to go about its business and proceed expanding with acquisitions through the election of President Joe Biden, even after Biden’s appointee, technology critic Lina Khan, took over on the FTC. But then Microsoft revealed its plan to purchase Activision Blizzard. On Dec. 8 the FTC argued that the transaction would violate federal law.
“Even with confidence in our case, we remain committed to creative solutions with regulators that may protect competition, consumers, and staff within the tech sector,” Brad Smith, Microsoft’s president and vice chair, said in a press release provided to CNBC. “As we have learned from our lawsuits up to now, the door never closes on the chance to search out an agreement that may profit everyone.”
To alleviate government opposition to the deal, Microsoft has offered concessions.
In October Phil Spencer, CEO of Microsoft’s gaming unit, said Microsoft had committed to bringing Activision Blizzard’s Call of Duty games to Nintendo consoles for a decade and keeping the games on Valve’s Steam game store. Microsoft has also offered to sign a 10-year agreement with Sony to release Call of Duty games on PlayStation consoles on the identical day they reach Microsoft Xbox consoles. “Sony refuses to deal,” Microsoft said in its filing.
Activision Blizzard has not made its recent games available through subscription services resembling Microsoft’s Game Pass, and the acquisition would make playing Activision Blizzard’s games cheaper, Microsoft said.
“The acquisition of a single game by the third-place console manufacturer cannot upend a highly competitive industry,” Microsoft said in its response. “That is especially so when the manufacturer has made clear it should not withhold the sport. The undeniable fact that Xbox’s dominant competitor has to this point refused to simply accept Xbox’s proposal doesn’t justify blocking a transaction that may profit consumers.”
Microsoft said that after taking almost a 12 months to analyze the deal and examining thousands and thousands of documents from Activision Blizzard and Microsoft, the FTC has not shown evidence that Microsoft is seeking to yank the sport series from PlayStation. Ensuring the games will likely be widely available is nice for Microsoft’s business, the corporate said.
In its own response to the FTC’s lawsuit, Activision Blizzard said that “if Xbox withheld Call of Duty from Sony’s PlayStation or other platforms that compete with Xbox, Xbox would immediately forgo billions of dollars in lost game sales and cleave off a large portion of the garners that Activision has worked so hard to draw and retain.”
Outside the U.S., Brazil gave the OK for the deal to proceed, while the UK has been scrutinizing it.
Activision Blizzard and Microsoft each pushed back on the FTC’s assertions.
The FTC said in its lawsuit that Microsoft had promised the European Commission that it would not have a motivation to forestall people from playing games from ZeniMax, a game publisher Microsoft acquired in 2021, on consoles apart from the Xbox, but after receiving approval for the ZeniMax deal from the European Commission, the corporate said it could be making some ZeniMax games exclusive.
“The European Commission agrees it was not misled, stating publicly the day after the grievance that Microsoft didn’t make any ‘commitments’ to the European Commission,” Microsoft said, “nor did the European Commission ‘depend on any statements made by Microsoft concerning the future distribution strategy concerning ZeniMax’s games.'”
The case will go before the FTC’s administrative law judge, Michael Chappell. Activision Blizzard and Microsoft each said the FTC’s procedures violate their right to procedural due process under the Fifth Amendment of the U.S. Structure.
Activision Blizzard said in its filing that the FTC “invented highly gerrymandered relevant product markets — including a ‘high-performance console’ market limited to Xbox and PlayStation consoles, in addition to individual markets for multi-game subscriptions and cloud gaming — in an try and support its conclusory theories of harm.”
Members of the general public sent greater than 2,100 emails to the UK’s Competition and Markets Authority in response to a statement from the agency describing 3 ways the deal could lessen competition. Around 75% of the emails expressed support for the acquisition, the agency said on Wednesday.
If the deal does close, Microsoft can be “the world’s number three gaming company by revenue, behind Tencent and Sony,” Spencer said on a conference call on the day of the deal announcement.
Within the months since then, two groups of Activision Blizzard employees have voted to form unions. Microsoft has said it’s committed to efforts that will make it easier for workers to make a decision on whether to affix or start a union.
“There isn’t a sensible, legitimate reason for our transaction to be prevented from closing,” Activision Blizzard CEO Bobby Kotick said in a press release provided to CNBC. “Our industry has enormous competition and few barriers to entry. We’ve seen more devices than ever before enabling players a wide selection of decisions to play games. Engines and tools are freely available to developers large and small. The breadth of distribution options for games has never been more widespread. We imagine we are going to prevail on the merits of the case.”
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