Microsoft, US regulators head to court over $69 bn Activision Blizzard deal

Microsoft will on Thursday try to get clearance to complete its $69 billion acquisition of video game maker Activision Blizzard in a legal standoff with US regulators that will reshape a hobby bigger than the movie and music industries combined.

The battle will pit Microsoft’s ambition to expand its video game footprint beyond its Xbox console against the US Federal Trade Commission’s bid to block a deal it claims will stifle competition and innovation at the expense of consumers.

It’s the latest development in a deal announced 17 months ago. Microsoft CEO Satya Nadella and Activision Blizzard CEO Bobby Kotick are both expected to testify at some point during five days of hearings in San Francisco before US District Judge Jacqueline Scott Corley that will end on June 29.

FTC lawyers will call in experts and the CEO of Sony, maker of the industry-leading PlayStation video game console, to show why Microsoft would get an unfair advantage if it was allowed to combine its Xbox franchise with the acquisition of Activision that would give it its own blockbuster video game titles like Call of Duty, World of Warcraft, and Candy Crush.

After all evidence and arguments are presented, Corley will decide whether or not to grant the FTC’s request for a court order that would keep the deal in a hold pattern until a more comprehensive administrative trial is scheduled to begin in Washington, D.C. on Aug. 2. The judge is not expected to rule until after the Fourth of July holiday.

If Corley declines to issue an injunction, Microsoft could move to close the deal before the July 18 deadline and avoid a $3 billion breakup fee.

The spat over the deal has highlighted the growing importance of video games, a process that already has the estimated 3 billion people around the world playing at least some of the time on a console, PC or increasingly, a smartphone. The market is expected to swell to 4.5 billion people by 2030.

All of these gamers are willing to shell out upwards of $70 to own iconic titles like Call of Duty or fork through a steady stream of recurring subscriptions to services like Microsoft Xbox Game Pass, Amazon’s Luna, and Nvida’s GeForce.

Microsoft is framing the proposed Activision deal as a way to make a head start against Sony’s PlayStation, which has a much larger market share, while providing new benefits to video game players.

Among other things, Microsoft cites a 10-year commitment to make Call of Duty available on the Nintendo Switch console and a willingness to strike a similar decade-long deal with PlayStation, and also argues that video gamers will get more access to more games on its device. Xbox subscription service.

The FTC countered that the deal would give too much power to Microsoft, already one of the richest companies in the world because of an empire of personal computer software that the US Department of Justice tried to dismantle in a high-profile antitrust case more than 20 years ago.

Regulators also claim Microsoft cannot be trusted not to progressively make its most popular video games exclusive to its Xbox console and subscription services, based on its handling of titles after buying ZeniMax Media in 2021.

The hearings will also be another test of the FTC’s intensified oversight of big tech companies under chairwoman Lena Khan, who has been outspoken about her belief that US regulators were too soft in past deals that helped power companies like Amazon and Google. and Facebook.

The courtroom conflict with Microsoft comes six months after the Federal Trade Commission (FTC) took Facebook’s owner Meta Platforms to court in Silicon Valley to try to stop the acquisition of a virtual reality fitness company only to be rejected by a judge in this case.

The FTC may face challenges persuading Corley to block the Activision deal. The judge previously cast doubt on the need to block possession in March when she dismissed a lawsuit brought by a group of players suing to stop possession.

Like regulators now, players have argued that Microsoft’s acquisition of Activision would stifle competition and reduce consumer choice. They later filed an amended lawsuit, but Corley in May denied their request for an injunction to block the deal.

Another major regulator, the UK’s Competition and Markets Authority, also took action to thwart the Microsoft takeover.

But European regulators representing the 27-nation bloc approved the deal last month on the condition that Microsoft make some promises aimed at boosting competition in the cloud-based gaming market. It has also been approved by a number of other countries, including China, Japan, Brazil and South Korea.

Microsoft criticized British regulators standing in the way of appealing their decision, as well as voicing strong opposition to British government officials.

(Only the title and image for this report may have been reworked by the Business Standard team; the rest of the content is generated automatically from a shared feed.)