Microsoft Faces Legal Battle with U.S. Regulators Over Activision Blizzard Acquisition

67

On Thursday, Microsoft will seek legal approval to finalize a $69 billion acquisition of Activision Blizzard, a leading video game developer. This potential merger is now in conflict with U.S. regulatory bodies who argue it could fundamentally alter the video gaming landscape, which currently surpasses the combined value of both the movie and music industries.

This case represents a clash between Microsoft’s strategy to broaden its gaming presence beyond its Xbox console and the U.S. Federal Trade Commission’s (FTC) efforts to block a deal they believe could undermine competition and hamper innovation, ultimately harming consumers.

The acquisition, which was announced 17 months ago, is expected to feature testimony from Microsoft CEO Satya Nadella and Activision Blizzard CEO Bobby Kotick during a five-day hearing in San Francisco presided over by U.S. District Judge Jacqueline Scott Corley, concluding on June 29.

FTC attorneys will rely on expert testimonies and a senior executive from Sony, creator of the top-selling PlayStation console, to illustrate why Microsoft could potentially monopolize the market by merging its Xbox franchise with Activision Blizzard. This acquisition would grant Microsoft control over popular titles like Call of Duty, World of Warcraft, and Candy Crush.

After all testimonies and arguments have been heard, Judge Corley will determine whether to grant the FTC’s request for a court order, which would delay the deal until a more detailed trial, scheduled to start in Washington D.C. on August 2. Her decision is anticipated after the Fourth of July holiday. If she rejects the injunction, Microsoft might be able to finalize the deal before the July 18 deadline, thereby avoiding a $3 billion breakup fee.

The controversy surrounding the deal highlights the growing significance of the video gaming industry, which already boasts an estimated global audience of around 3 billion occasional console, PC, or smartphone gamers. Predictions indicate this number could rise to 4.5 billion by 2030.

These gamers are frequently willing to spend over $70 for high-profile games like Call of Duty or subscribe to recurring services such as Microsoft’s Xbox Game Pass, Amazon’s Luna, and Nvidia’s GeForce.

Microsoft asserts the proposed Activision deal is a strategy to compete more effectively with Sony’s PlayStation, which dominates the market, while simultaneously providing additional benefits to gamers. However, the FTC argues the deal would further empower Microsoft, who’s already a major player due to its PC software empire, which faced its own antitrust case over two decades ago. The FTC suggests Microsoft might monopolize popular video games, exclusively favoring its Xbox console and subscription services, given its history after acquiring ZeniMax Media in 2021.

The hearings also offer an opportunity to evaluate the FTC’s intensified regulation of Big Tech under Chairperson Lina Khan, who has previously criticized the leniency shown by U.S. regulators towards powerhouse companies like Amazon, Google, and Facebook. This legal bout follows FTC’s attempt to halt Facebook owner Meta Platforms’ acquisition of a VR fitness company six months ago, which was dismissed by the court.

The FTC’s case against Microsoft could encounter obstacles, as Judge Corley previously expressed doubts about blocking the Activision takeover when dismissing a lawsuit filed by a group of gamers in March. The gamers had argued that Microsoft’s acquisition would limit competition and consumer choice.

Apart from the U.S., the U.K.’s Competition and Markets Authority also expressed opposition to the acquisition. Nonetheless, the merger received conditional approval from European regulators representing 27 countries last month, with the proviso that Microsoft make certain commitments to encourage competition in cloud-based gaming. It also received the green light from various countries, including China, Japan, Brazil, and South Korea.

In response to opposition from the U.K., Microsoft appealed the decision and publicly voiced objections to U.K. government officials.

—-

AP Technology Writer Matt O’Brien contributed to this story.

Frequently Asked Questions (FAQs) about Microsoft Activision Blizzard Acquisition

More about Microsoft Activision Blizzard Acquisition

• Microsoft’s Official Announcement
• Federal Trade Commission
• Activision Blizzard Official Website
• Previous Microsoft Acquisitions