Microsoft and Activision Blizzard submit responses to the FTC’s antitrust litigation

Microsoft’s Response to FTC Antitrust Lawsuit

Microsoft has officially responded to the Federal Trade Commission’s antitrust lawsuit seeking to block its acquisition of Activision Blizzard for $68.7 billion. The company refuted the agency’s claims that the merger would negatively impact competition in the gaming industry, arguing instead that consumers would benefit from the deal. Microsoft emphasized that allowing consumers to play Activision’s games on new platforms and access them in more affordable ways would ultimately be advantageous.

The FTC’s Concerns

The FTC had previously expressed concerns that the acquisition would enable Microsoft to stifle competition in the gaming market, particularly with its Xbox gaming consoles and subscription content and cloud-gaming business. The agency pointed to Microsoft’s plans to make certain titles from Bethesda exclusive to its platforms, raising fears of anti-competitive behavior. Microsoft acknowledged that it intended to make three future Bethesda titles exclusive to Xbox and PC, with the specifics of the games redacted in the filing.

The Future of Call of Duty

A significant point of contention surrounding the deal is the future of the popular franchise Call of Duty. In an effort to address regulatory concerns, Microsoft pledged to keep Call of Duty available on competitors’ platforms for at least a decade post-acquisition and to bring the game to Nintendo consoles. Despite this offer, Sony has not yet accepted the proposal. Microsoft underscored that the acquisition of a single game could not drastically alter the competitive landscape, especially when commitments were made to ensure broad access to the game.

Constitutional Concerns and Regulatory Engagement

Both Microsoft and Activision Blizzard criticized the FTC’s approach, with Microsoft questioning the constitutionality of the agency’s administrative proceedings. The companies argued that the FTC’s focus on potential harms to competitors rather than benefits to consumers diverged from the core purpose of antitrust laws. Nevertheless, Microsoft expressed a willingness to collaborate with regulators to address concerns and secure approval for the acquisition. Microsoft’s President and Vice Chair, Brad Smith, emphasized the company’s commitment to finding mutually beneficial solutions that safeguard competition, consumer interests, and industry workers.
“There is no sensible, legitimate reason for our transaction to be prevented from closing. Our industry has enormous competition and few barriers to entry. We have seen more devices than ever before enabling players a wide range of choices to play games,” Activision Blizzard CEO Bobby Kotick said in a statement to Engadget. “Engines and tools are freely available to developers large and small. The breadth of distribution options for games has never been more widespread. We believe we will prevail on the merits of the case.”

The deadline for the acquisition to close is in July. If it hasn’t done so by then, Microsoft and Activision will need to renegotiate the deal or abandon it — Microsoft would then face a breakup fee of as much as $3 billion. As Axios notes, though, the FTC’s antitrust case is set to go before its administrative court on August 2nd. In the meantime, the agency could still seek a preliminary injunction in federal court to stop the deal from closing.

The proposed acquisition is also facing scrutiny from regulators in the UK and the European Union. The jurisdictions’ respective competition agencies are expected to issue rulings on the deal in the first half of 2023.