Well, here’s a pre-Thanksgiving stunner. According to Politics, the Federal Trade Commission will “likely” try to block Microsoft’s attempt to buy Activision Blizzard for $68.7 billion. The agency could file an antitrust suit as early as next month. If the FTC makes such a move, it would be a major impediment to the deal.
The report says that the FTC’s four commissioners have not yet voted on whether to file a lawsuit. The agency also hasn’t yet met with Microsoft or Activision Blizzard’s lawyers about the possibility. However, Politics states that FTC employees have questioned some of Microsoft and Activision’s claims.
The FTC would be particularly concerned about whether the merger would give Microsoft an unfair advantage in the video game industry. As things stand, Xbox is the third largest player in the gaming market behind PlayStation and Tencent.
Microsoft and Activision have tried to downplay the importance of the deal, which is again worth $68.7 billion. Sony has claimed that if Microsoft keeps games like Call of Duty away from PlayStation, Sony would be at a major disadvantage.
Sony risks losing hundreds of millions of dollars a year if Microsoft snatches Call of Duty from PlayStation. However, Microsoft said it offered Sony a deal earlier this month to keep Call of Duty on PlayStation for 10 years.
Microsoft has also said the Activision deal is more about helping it become a player in mobile gaming (via e.g. Candy Crush Saga) than to improve its PC or console offerings. It still wants to put Activision Blizzard titles on Game Pass.
Microsoft and Sony have been slinging mud at each other in regulatory filings in several countries in recent months. They both chose facts to support their arguments. For example, Microsoft claims Call of Duty is not a must-have game for Sony and it wouldn’t hurt PlayStation to put it on Game Pass.
Activision has disputed claims that the deal would also have a negative impact on competition. “Any suggestion that the transaction could lead to anti-comp effects is completely absurd,” said Activision spokesman Joe Christinat. Politics. “This merger will benefit gamers and the US gaming industry, especially as we face increasingly fierce competition from abroad.”
Last month, one of the FTC’s Republican members resigned, meaning the agency has three Democratic commissioners and one Republican as things stand. Noah Phillips, who left his position as Commissioner, had resisted many attempts by FTC Chairman Lina Khan to rein in the power of the tech industry. For example, he voted against a lawsuit that wants to block Meta’s purchase of a VR startup called Within Unlimited. In other words, if Khan wants to file an antitrust suit against the Microsoft-Activision Blizzard deal, she’s now likely to face less resistance from other commissioners.
Politics says the FTC is nearing completion of its antitrust investigation, which may have begun as early as February. The agency has reportedly already heard testimony from Microsoft CEO Satya Nadella and Activision counterpart Bobby Kotick.
FTC regulators have different concerns about the Microsoft-Activision deal than Call of Duty. “Researchers are trying to determine how Microsoft can use future, unannounced titles to boost its gaming business.” Politics say. Regulators in the UK and the EU are also scrutinizing the acquisition, meaning it will be at least spring before Microsoft and Activision can close the deal, if at all.
I’ve been saying since the announcement that the planned merger is far from a done deal, but any FTC lawsuit could be a death knell. Politics notes that if the FTC files an antitrust lawsuit by the end of the year or in January, it likely won’t be resolved until July — after the TBEN Microsoft and Activision have set for closing the deal. If that were the case, the companies would have to renegotiate their agreement or, failing that, call off the merger.
Again, there is no guarantee that the FTC will try to block the merger. But Politicos reporting is usually solid and there is no smoke without fire. We’ll have to wait and see how things pan out in the coming weeks and months.
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