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Gamers hit Microsoft with antitrust suit over Activision Blizzard deal

Gamers say Microsoft would have too much power over the gaming world if a nearly $69 billion deal to own its rival goes through.

SAN FRANCISCO (CN) — Even as the feds fight to stop Microsoft from snatching up Activision Blizzard in what would be the largest acquisition in video game industry — and Microsoft — history, gamers sued Tuesday to block the deal as well.

A group of plaintiffs filed a federal antitrust suit Tuesday, looking to block the $68.7 billion deal. They claim that if this deal goes through Microsoft would enjoy drastically reduced competition and have too much market power in the video game industry. 

Activision Blizzard has developed and published some of the most popular game franchises in history, such as Call of Duty, World of Warcraft, StarCraft, Overwatch, Diablo and Candy Crush. Call of Duty is considered to be one of the most successful and important gaming franchises in the console gaming market. 

This month, the Federal Trade Commission also sued to halt Microsoft's proposed acquisition. The FTC says Microsoft's 2021 acquisition of ZeniMax Media, the parent company of game developer Bethesda Softworks, makes the Activision deal unworkable. At the time, Microsoft assured the European Commission that it wouldn't withhold ZeniMax titles from rival consoles. But once the commission cleared the acquisition, Microsoft revealed that several of the newly acquired ZeniMax titles, including Starfield and Redfall would be Microsoft exclusives.

In a 45-page complaint, the plaintiffs — all people from California, New Mexico and New Jersey who purchase and play video games — say the current trend toward concentration, reduced competition and “tendency to create a monopoly” was already harming competition at an alarming rate before the proposed acquisition was announced.

“Vigorous enforcement of the antitrust laws by private persons is an essential part of the congressional plan to ensure that competition rather than monopoly is, and remains, the rule of trade in the United States, including in the video game industry,” the plaintiffs say in their complaint.

The gamers say video game industry revenue is projected to reach $197 billion this year, with an annual growth rate of 7.67%. In 2021, an estimated 3.24 billion people bought and played video games globally — with 226.6 million gamers in the United States or roughly 68% playing some form of video games. 

Microsoft has bolstered its power over the video game ecosystem through many acquisitions. According to the complaint, it now owns 24 different gaming studios, including Mojang Studios — known for games such as Minecraft — and Ninja Theory Ltd., maker of Devil May Cry and Disney Infinity. Activision Blizzard is also the product of many significant mergers including Blizzard Entertainment, acquired through a merger with parent Vivendi Games.

The gamers say the proposed acquisition of Activision Blizzard poses a threat to customers as it could substantially lessen competition in product markets and cause game prices to increase. It could also create “less innovation, less creativity, less consumer choice (and) decreased output.”

And the merger could greatly cut competition in the labor market for video game labor talent, they say. Employees in the video game industry may have significantly less choice among employers with Microsoft's outsized market power in hiring and retaining employees. Activision Blizzard is currently engulfed in lawsuits from employees and from the California Department of Fair Employment and Housing who claim it engaged in gender discrimination and sexual harassment. 

“Concentration in the market may further limit employees’ negotiating power and ability to change employers for improved working environments and compensation,” the plaintiffs say in their complaint. 

A merger could also imperil the availability of games. Once owned by Microsoft, games previously available for Macintosh could be developed exclusively for Windows, reducing competition for operating systems. Microsoft has engaged in similar practices before, restricting access to products from studios they acquired.

In addition to asking the court to block the merger, the gamers want to see Microsoft’s reverse termination fee agreement — what the tech giant would pay Activision Blizzard if the merger flops — declared null and void. Microsoft would have to pay Activision Blizzard $2 billion if the merger is terminated prior to Jan. 18, 2023, $2.5 billion if terminated after Jan. 18, 2023, or $3 billion if terminated after April 18, 2023.

A Microsoft spokesperson said via email Tuesday that the merger is a good thing for consumers and the video game industry.

“This deal will expand competition and create more opportunities for gamers and game developers as we seek to bring more games to more people," the spokesperson said.

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Categories / Consumers, Entertainment, Media, Technology

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