FTC votes to block Microsoft Activision Blizzard acquisition
Microsoft’s proposed purchase of Activision Blizzard just hit a major roadblock.
The Federal Trade Commission is seeking to block the Microsoft Activision Blizzard acquisition. The $69 billion deal was first announced in February 2022 as the largest deal ever proposed in the video game industry. It’s also Microsoft’s largest acquisition throughout the company’s history.
In recent months, the deal has come under scrutiny from both regulators and competitors like Sony. British regulators and the European Union cast doubts on the deal as anti-competitive in an industry that has undergone significant consolidation in recent years. Microsoft itself has bought a number of studios, including Bethesda, Obsidian Entertainment, Double Fine Productions, and Mojang Studios.
Even with the record-breaking deal, Xbox Boss Phil Spencer said in September that Microsoft is open to buying even more studios.
FTC: Microsoft Activision Blizzard acquisition will stifle competition
In a complaint issued today, the FTC pointed to Microsoft’s record of acquiring and using valuable gaming content to suppress competition from rival consoles. The independent agency specifically cites the acquisition of ZeniMax, the parent company of Bethesda Softworks. Microsoft decided to make several of Bethesda’s titles, including Starfield and Redfall, Xbox exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”
Sony strongly opposes the deal
The FTC complaint is in line with what Sony argues: that Microsoft’s acquisition would harm consumers. Just last week, the Japanese console maker argued that it was unlikely to replicate Call of Duty‘s success. Therefore, the merger would prove detrimental to its business if Call of Duty became an Xbox exclusive.
Even assuming that SIE had the ability and resources to develop a similarly successful franchise to Call of Duty, it would take many, many years and billions of dollars to create a challenger to Call of Duty – and the example of EA’s Battlefield shows that any such efforts would more than likely be unsuccessful.
For its part, Microsoft committed to bringing Call of Duty games to Nintendo consoles for 10 years. It made a similar commitment to Steam, which directly competes with Activision Blizzard’s Battle.net PC game launcher.
The industry already lacks competition
The FTC is arguing that the Xbox Series X and S are “one of only two types of high-performance video game consoles.” They note that Microsoft offers a leading video game content subscription service and cloud-based video game streaming service, Xbox Game Pass.
“Activision is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices, including video game consoles, PCs, and mobile devices,” the agency notes. “It produces some of the most iconic and popular video game titles, including Call of Duty, World of Warcraft, Diablo, and Overwatch” with a combined 154 million monthly active users around the world.
Activision currently has a strategy of offering its games on many devices including the rival PlayStation 4 and PlayStation 5. That could change if the deal is allowed to proceed, the FTC warns in its complaint.
“With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers,” they add.
Is the Microsoft Activision Blizzard deal dead?
The Federal Trade Commission is tasked with promoting competition and protecting consumers. It voted three to one in favor of the motion. FTC Commissioner Christine S. Wilson, an appointee of former president Donald Trump, voted no. All of the commission’s Democrats voted yes.
Although the FTC’s action is a major speedbump for Microsoft, it does not guarantee that the deal will collapse. The complaint is the first part of the process. The FTC issues an administrative complaint when it has “reason to believe” that the law has been or is being violated.
The issuance of the administrative complaint is just the beginning. Next, the allegations will be tried in a formal hearing before an administrative law judge. You can learn more about how competition benefits consumers or file an antitrust complaint on the FTC website.
