The Activision Merger Challenge: Why Do We Need An FTC? Commentary on Microsoft’s Timing and Public Policy Concerning the US Merger Controversy
In a Wall Street Journal op-ed Monday, Microsoft’s Smith said an FTC suit to block the Activision deal would be a “huge mistake” and added that the acquisition would allow Microsoft to innovate new features such as the ability for consumer to play the same game on multiple devices, just as they can with streaming TV shows or music.
The FTC states that Microsoft made some popular game titles exclusive to it despite telling European regulators it had no intention of doing so.
In a letter to staff, Kotick told them that he is confident the acquisition will close. “The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” he said. The company also posted an internal email penned by Jeb Boatman, Activision’s SVP of litigation, regulatory, and public policy law, outlining its position on the deal.
The US merger challenge reflects the biggest setback yet for Microsoft as it has aggressively courted regulators around the world in hopes of persuading them to bless the deal. It is the most significant challenge the FTC has had to the tech industry since it sued to break up Facebook-owner Meta in 2020.
The deal was scrutinized by officials in the United Kingdom and the European Union. But the FTC complaint marks the first attempt by an antitrust regulator to block the deal outright.
Microsoft has recently branched out into a number of partnerships to head off claims that it is going to keep gaming content from rivals. This week, Microsoft said it had reached a 10-year deal with Nintendo ensuring that it will have access to Call of Duty for the foreseeable future.
The company’s corporate vice president of communications, Frank X. Shaw, also tweeted a link to a document titled: “Get The Facts: How Microsoft is Committed to Growing Gaming Communities.”
Microsoft has also accused Sony of paying developers to keep their content off of its Xbox Game Pass service, and Sony has even argued that Microsoft’s Activision Blizzard acquisition could “hurt developers and lead to price rises.”
The FTC’s Complaint: Is It Good to ‘Blow Up or Blow-Up’ or Does Microsoft Want to Shut Down Dodgy Deals?
The FTC voted 3-1 to issue the complaint after a closed-door meeting, with the three Democratic commissioners voting in favor and the sole Republican voting against. A fifth seat on the panel is vacant after another Republican left earlier this year.
“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,” Smith said.
The FTC’s challenge — which is being filed in an administrative court — could be a test case for President Joe Biden’s mandate to scrutinize big tech mergers.
Antitrust regulators under Biden “have staked out the view that for decades merger policy has been too weak and they’ve said, repeatedly, ‘We’re changing that,’” said William Kovacic, a former chair of the FTC.
According to the Republican commissioner appointed in 2006 by George W. Bush, the goal is to not allow “dodgy deals and not accept weak settlements.” But he said trying to block this acquisition could trigger a legal challenge from Microsoft that the company has a good chance of winning.
“The company has made a number of concessions,” he said. “If the FTC turns down Microsoft’s commitments, Microsoft would likely raise them in court and say the FTC is being incorrigibly stubborn about this.”