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Microsoft will fight for more than $68.7 billion with Activision Blizzard

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Microsoft is embarking on a battle with the Federal Trade Commission over whether the United States will block the tech giant’s planned acquisition of video game company Activision Blizzard.

On Thursday, Microsoft filed a formal challenge to the lawsuit filed by the Federal Trade Commission, saying the $68.7 billion deal was an illegal acquisition that needed to be stopped.

After years of avoiding political backlash directed at big tech peers like Amazon and Google, the software giant now appears to be on a collision course with U.S. regulators emboldened by President Joe Biden’s push to crack down on anti-competitive behavior. .

The Federal Trade Commission says the merger could violate antitrust laws by cracking down on competitors for Microsoft’s Xbox game console and growing Xbox Game Pass subscription business.

At the heart of the dispute is Microsoft’s rivalry with PlayStation maker Sony to secure popular Activision Blizzard franchises such as military shooter Call of Duty.

Microsoft’s response to the FTC attempts to downplay Xbox’s role in the industry, describing itself as the “third game console maker” behind Sony and Nintendo, and one of many popular video game publishers that “n ‘do not exist on mobile’. “, where you try to make money.

The dispute could be a tough test for Biden-appointed Federal Trade Commission Chair Lena Khan, who has sought to strengthen antitrust enforcement. The FTC voted 3-1 earlier in December to release the complaint to block the deal, with Khan and the other two Democratic commissioners voting in favor and the only Republican voting against.

The deal is also under intense scrutiny in the European Union and the United Kingdom, with investigations due to be completed until next year.

The FTC complaint points to Microsoft’s 2021 acquisition of popular game developer Bethesda Softworks and its parent company, ZeniMax, as an example of where Microsoft is launching certain upcoming game titles exclusively on Xbox despite the fact to reassure European regulators that he has no intention of doing so.

Microsoft objected to the FTC’s characterization on Thursday, saying it had made it clear to European regulators that it “would handle exclusivity for future game titles on a case-by-case basis, which is exactly what it did “.

The FTC lawsuit describes top-selling franchises like Call of Duty as important because they develop a loyal user base who are attached to their favorite console or streaming service.

“By controlling Activision content, Microsoft will have the ability and increased incentive to withhold or dilute Activision content in ways that significantly reduce competition, including competition on quality, price, and product innovation. products,” the FTC lawsuit states. “This loss of competition is likely to inflict significant harm on consumers in multiple markets at a pivotal time for the industry. »

Microsoft said it will vigorously fight the case in court with a team led by the company’s prominent attorney, Beth Wilkinson, while leaving open the possibility of a settlement.

“Even with confidence in our cause, we remain committed to creative solutions with regulators that will protect competition, consumers and tech industry players,” Microsoft Chairman Brad Smith said in a statement Thursday. “As we have learned from past lawsuits, the door is never closed to the possibility of reaching an agreement that can benefit everyone. »

Microsoft’s last major antitrust battle took place more than two decades ago when a federal judge ordered its dissolution after the company’s anticompetitive actions related to its dominant Windows software. This decision was overturned on appeal, although the court imposed other sanctions on the company.

The FTC’s decision to send the complaint to House Administrative Judge D. Michael Chappelle instead of seeking an urgent federal court injunction to stop the merger could delay the case until at least August, when the first hearing is planned. Microsoft’s deal with Activision requires Blizzard to pay the video game company a severance fee of up to $3 billion if it can’t complete the deal by July 18.

The timing and progress of the deal could change depending on how UK and European regulators judge the merger next year. If Microsoft gets approval in Europe, it could use it to try to speed up the process in US courts.

The merger faced another challenge this week from a group of individual video game players who sued in federal court in San Francisco to block the deal on antitrust grounds.

Their attorney Joseph Alioto said the plaintiffs, who are all fans of Activision Blizzard’s Call of Duty franchise and other popular titles like World of Warcraft, Overwatch and Diablo, are particularly concerned about how the merger will affect the quality, innovation and future production of games.

“When there is a lack of competition, the quality necessarily drops,” Alioto said. “By eliminating Activision, it gives Microsoft a strong position to do whatever it wants. »

By Matt O’Brien

associated press

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