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FTC sues to block Microsoft’s $69 billion acquisition of Activision

The commission said Microsoft's 2021 acquisition of ZeniMax supports its concern that the tech giant may withhold games from rival console makers.

(CN) — The Federal Trade Commission sued to halt Microsoft's proposed $69-billion acquisition of "Call of Duty" maker Activision Blizzard, saying it could hurt Microsoft's competitors in the gaming-console business as well as in its rapidly growing subscription content and cloud-gaming business.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” Holly Vedova, director of the FTC’s Bureau of Competition, said in a statement Thursday. “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.”

The commission filed an administrative complaint that spelled out its objections to what would be the largest acquisition in the video-game industry as well as the largest in Microsoft's history. The merger, the FTC said, would give Microsoft control of some of the most iconic video game titles on the market, including several leading AAA franchises such as "Diablo" and "Overwatch" and the marquee "Call of Duty" franchise.

The "Call of Duty" franchise alone has brought in $27 billion in revenue since it launched in 2003 through 2020, the FTC said, and has millions of monthly active users. That makes unfettered access to these games extremely important for Microsoft competitors in the console business because players will want to play them on the equipment that supports them best.

"Activision’s content is extremely important for, and drives adoption of, video game consoles," according to the FTC's complaint. "Given their immense popularity, Activision’s titles are of particular importance to console makers, including Microsoft’s competition."

Microsoft and Sony are the only two manufacturers of high-performance video game consoles, and Activision currently has a policy of offering its games on many devices regardless of producer, according to the FTC.

That could change, the FTC said, if the acquisition of Activision is allowed to proceed. In that case, the tech giant 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.

Microsoft's acquisition last year of ZeniMax Media, the parent company of game developer Bethesda Softworks, the FTC said supports its decision to fight the Activision deal. At the time, Microsoft assured the European Commission that it wouldn't withhold ZeniMax titles from rival consoles. But once the EC cleared the acquisition, Microsoft revealed that several of the newly acquired ZeniMax titles, including "Starfield" and "Redfall" would be Microsoft exclusives.

“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers," Microsoft Vice Chair and President Brad Smith said in a statement. "We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.” 

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