Federal regulators are suing to block Microsoft’s proposed $69 billion acquisition of video game maker Activision Blizzard, citing the computing giant’s previous broken promises not to withhold popular gaming titles from rival consoles, according to a Thursday filing by the Federal Trade Commission.
The primary concern stated by the FTC in its statement regarding the lawsuit was the merger’s potential impact on competition between Microsoft and its main console competitor, Sony. The planned merger would give Microsoft ownership of Activision’s “Call of Duty” franchise, one of the most popular series in gaming, which along with ownership of other ABK franchises like “World of Warcraft” and “Overwatch would give the company a potentially unfair advantage if those games become exclusive to Microsoft-owned platforms like Windows and Xbox or if those platforms get more favorable service for those games compared to other consoles like Sony’s Playstation.
“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. “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 FTC cited Microsoft’s acquisition of Bethesda, the game developer behind the “Elder Scrolls” series, as an example of how the company makes franchises that fall under its ownership into exclusive titles. “Microsoft decided to make several of Bethesda’s titles including ‘Starfield’ and ‘Redfall’ Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles,” the FTC wrote.
“With control over Activision’s blockbuster franchises, Microsoft 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, resulting in harm to consumers,” the agency continued.
In a statement released on Twitter, Microsoft President Brad Smith expressed confidence that his company would win the lawsuit. Microsoft also says it has sent an offer to Sony for a 10-year agreement to make all “Call of Duty” titles available on Playstation on the same day as Xbox, though Sony has not responded to that offer.
“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Smith tweeted. 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.”
Read the full statement from the FTC below:
Federal Trade Commission is seeking to block technology giant Microsoft Corp. from acquiring leading video game developer Activision Blizzard, Inc. and its blockbuster gaming franchises such as Call of Duty, alleging that the $69 billion deal, Microsoft’s largest ever and the largest ever in the video gaming industry, would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.
In a complaint issued today, the FTC pointed to Microsoft’s record of acquiring and using valuable gaming content to suppress competition from rival consoles, including its acquisition of ZeniMax, parent company of Bethesda Softworks (a well-known game developer). Microsoft decided to make several of Bethesda’s titles including Starfield and Redfall Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition. “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.”
Microsoft’s Xbox Series S and Series X are one of only two types of high performance video game consoles. Importantly, Microsoft also offers a leading video game content subscription service called Xbox Game Pass, as well as a cutting-edge cloud-based video game streaming service, according to the complaint.
Activision is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices, including video game consoles, PCs, and mobile devices. It produces some of the most iconic and popular video game titles, including Call of Duty, World of Warcraft, Diablo, and Overwatch, and has a combined 154 million monthly active users around the world, according to the FTC’s complaint. Activision currently has a strategy of offering its games on many devices regardless of producer.
But that could change if the deal is allowed to proceed. With control over Activision’s blockbuster franchises, Microsoft 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, resulting in harm to consumers.
The Commission vote to issue the complaint was 3-1, with Commissioner Christine S. Wilson voting no. A copy of the administrative complaint will be available shortly.
Pamela Chelin contributed to this report.