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Gamers line up to fight Microsoft-Activision merger

Microsoft lobbied to dismiss a lawsuit that could very well block the largest deal in the history of the tech industry.

SAN FRANCISCO (CN) — According to reports in the gaming press, fans of the game Call of Duty have plenty to look forward in November when the franchise's newest iteration hits the market: multiplayer gaming, zombies, and a new map for Warzone 2. But some enthusiasts have more immediate concerns, such as whether Microsoft’s attempted $69 billion merger with the hit game’s creator Activision Blizzard will interfere with their efforts to keep playing.

The all-cash deal, ostensibly set to go through on May 22, is said to be the largest in the history of the tech industry. It would give Microsoft, maker of the Xbox console and gaming system, control of popular game franchises such as World of Warcraft and Candy Crush, in addition to Call of Duty. The proposed merger has also attracted the attention of a wary Federal Trade Commission and numerous governments around the world.

Attorneys for both Microsoft and the 10 plaintiffs hoping to block the merger appeared before U.S. District Judge Jacqueline Scott Corley on Friday morning for a hearing on motions to dismiss the case and for a preliminary injunction, respectively. This was Microsoft’s second stab at having the suit dismissed. Corley ruled in the tech giant’s favor back in March but left room for the plaintiffs to restate their case in an amended complaint.

The plaintiffs — 10 individual gamers from around the United States — claim the proposed merger will harm them by potentially moving Activision’s games, Call of Duty notably, to exclusive platforms — cutting off access to people who aren’t on those platforms and forcing them to buy new consoles to continue playing.  In addition, they say the merger could give Microsoft “far-outsized market power, with the ability to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition.”

Microsoft’s attorneys, stating they had submitted evidence under seal regarding why the plaintiffs will be able to continue playing their games, argued the plaintiffs need to establish that they’ll be injured by the merger.

“Not having the choice on which console to play isn’t an injury?” asked Corley.

“They’re going to be able to buy new releases,” Microsoft attorney Valerie Williams replied, but added it's possible in the future the games could become exclusive.

Arguing for the plaintiffs, attorney Joseph Alioto Sr. said that the harm begins the moment the merger is approved. He noted California v. American Stores, an attempt in 1990 by what was then the fourth largest grocery chain in California to buy out the largest chain. The state argued the takeover was anticompetitive and the court preliminarily ordered American Stores to operate the acquired stores separately pending resolution of the suit.

“Lessening of competition is precisely the kind of injury that the Clayton Act was intended to protect,” said Alioto. If the May 22 merger goes through, he continued, Microsoft could begin instituting changes on May 23. “The danger is there. It’s in their face. It’s immediate.”

Also arguing for the plaintiffs, attorney David Seidel drove home the immediacy of his clients’ concerns.

“The day the merger is approved, you lose Activision Blizzard,” he said. “As we speak right now, Activision is developing games for rivals to Microsoft’s platforms. The second this merger occurs, there are no more games as indicated by Microsoft’s previous actions.”

In 2008, for example, Microsoft shut down service for Sidekick, an early smartphone, for T-Mobile customers which it had obtained as part of a $500 million purchase of Danger, a company specializing in hardware design, software, and services for mobile computing devices.

“We don’t have evidence that the day the merger occurs, the clients will feel ripple effects. On day one of the merger, Call of Duty games will become available on the Microsoft platforms. If down the road, they change it — once Call of Duty goes on [cloud-based, Microsoft-owned] Game Pass and isn’t available on any other platform, players will start to gravitate to Game Pass. Once a critical mass of players goes to Game Pass, our clients are hurt because they need choice.”

“The day after the merger, they can play at least on Game Pass,” observed Corley. “Down the road, they may have less choice but immediately afterward, they will have more choice.”

Seidel replied, “Once people migrate to the Microsoft platform, they lose choice."

Corley took the arguments under submission and will rule later.

Categories / Business, Consumers, Media, Technology

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