The Biden administration on Thursday attempted to block Microsoft’s $69 billion (about Rs.5.66.8 billion) bid to buy Call of Duty maker Activision Blizzard, setting a bone of contention thrown in front of the tech giant’s plans to rapidly expand its portfolio of popular games to catch up with larger competitors.
Microsoftwho owns it Xbox Console and gaming network platform, announced in January 2022 that it would buy Activision for US$68.7 billion (around Rs.5.64.474 billion) in the games industry’s biggest deal in history.
Without activity and its variety of games on mobile, console, and PC, Microsoft may struggle to attract users to its burgeoning game-access subscription service. Acquiring subscribers has become a priority for big tech companies as traditional sources of growth like ad sales become less reliable.
The US software company had said it wanted to compete with leading gaming companies with the deal Tencent and PlayStation owner Sonywho has criticized the deal.
But in its complaint, the US Federal Trade Commission, which enforces antitrust law, said Microsoft had a record of hoarding valuable gaming content.
“Microsoft has already shown that it can and will withhold content from its gaming competitors,” said Holly Vedova, director of the FTC’s competition bureau
. “Today, we’re trying to stop Microsoft from taking control of a leading independent games studio and using it to uncompetitively compete in several dynamic and fast-growing gaming markets.”
The agency has scheduled a hearing before an administrative judge for August 2023.
Microsoft President Brad Smith said the company will fight the FTC. “While we believed in giving peace a chance, we have full confidence in our case and welcome the opportunity to take our case to court,” he said.
We’ve been committed to addressing competition concerns since day one, including by offering proposed concessions to the FTC earlier this week. While we believe in giving peace a chance, we have full confidence in our case and welcome the opportunity to bring it to justice.
— Brad Smith (@BradSmi) December 8, 2022
The Biden administration has taken a more aggressive approach to antitrust enforcement. The US Department of Justice recently stopped a US$2.2 billion (about Rs.18,074 billion) merger between Penguin Random House, the world’s largest book publisher, and smaller US competitor Simon & Schuster.
“This is further evidence of the government and antitrust authorities’ war on big tech,” said Andre Barlow of the law firm Doyle, Barlow and Mazard. Both the Trump and Biden administrations have prioritized big tech in antitrust enforcement.
Shares of Activision closed up 1.5 percent at $74.76 (about Rs. 6,100) while Microsoft slipped from previous highs but closed about 1 percent higher at $247.40 (about Rs. 20,330).
Activision, which has long dreamed of being a Disney-like entertainment conglomerate, also recognized that it needed more technical expertise and could be forced to trim its game roster to shift resources to emerging areas like AI.
competition concerns
The FTC said its concern is that Activision’s popular games, including World of Warcraft and Diablowould no longer be offered on a range of consoles, PCs and mobile devices.
While Microsoft has proposed concessions to address competition concerns, the rapid pace of change in the tech and gaming industries could render these terms useless over time.
To woo regulators, shortly after announcing the deal, Microsoft unveiled a set of new principles for its app store, including open access for developers that meet privacy and security standards.
This month, in a further move toward outspoken criticism, Microsoft made a 10-year commitment to offer an offer call of Duty, the popular first-person shooter series, on Nintendo platforms. Microsoft made the same offer to Sony.
Antitrust challenges have stalled as companies proposed a “solution” to antitrust damages caused by a deal, said William Kovacic, a former FTC chairman who now teaches law.
“I think we can predict with a high degree of certainty that he (the judge) will listen to these arguments (from Microsoft) and may understand them,” Kovacic said.
Chair Lina Khan and the two Democrats on the commission voted to authorize the complaint, while Commissioner Christine Wilson, a Republican, voted no.
Activision Blizzard CEO Bobby Kotick told employees Thursday he was confident the deal would move forward.
“The claim that this deal is anti-competitive is not consistent with the facts and we believe we will win this challenge,” he told employees, saying he believes the companies’ arguments “despite a regulatory environment, what you focus on would win ideology and misconceptions about the tech industry.”
The deal is also facing regulatory headwinds in Europe.
Beginning in late November, Microsoft should offer remedies to EU antitrust authorities in the coming weeks to ward off formal objections to the deal, people familiar with the matter said. The deadline for the European Commission to prepare a formal list of competition concerns, known as a notice of objection, is January.
© Thomson Reuters 2022
