FTC Officially Files To Block Microsoft–Activision Blizzard Deal

The U.S. Federal Trade Commission filed a lawsuit on Thursday to block Microsoft’s proposed acquisition of Activision Blizzard, the most valuable video game transaction of all time.

The FTC commissioners voted 3-1 to bring the lawsuit forward after reports and anticipation that the most powerful antitrust body in the world may take action against the tech and game giants. The regulators’ primary concern is around console exclusivity and the impacts that the acquisition could have on an already tightly-controlled ecosystem of publishers.

“The Proposed Acquisition would give Microsoft total control over Activision’s content, thereby giving Microsoft the ability to fully withhold Activision content from rivals, raise rivals’ costs, change the terms and timing of access to Activision content, or degrade the quality of Activision content available for rival consoles and subscription services,” the FTC wrote in its heavily-redacted complaint.

The FTC’s action will alter the timeline that Microsoft has publicly communicated—aiming to complete the merger by no later than June 2023, the end of its fiscal year. Microsoft is now playing defense on three fronts in the Western world, as the FTC joins British and European Union regulators in challenging the acquisition.

Microsoft has repeatedly pledged that it will keep Activision Blizzard’s titles, such as “Call of Duty” and “Overwatch,” on all consoles, including the PlayStation 5—which the FTC takes particular concern over. Microsoft also made a pledge this week that, if the merger is completed, it will bring “Call of Duty” to the Nintendo Switch for the next 10 years, a first for the world’s most popular first-person shooter franchise.

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But the FTC calls bullshit, pointing out that Microsoft quickly made many of the forthcoming Bethesda titles like “Starfield,” “Redfall” and “Elder Scrolls VI” Xbox and PC exclusive following its acquisition of ZeniMax in March 2021.

“Microsoft’s past conduct is telling. Despite statements by Microsoft toEuropean regulators disavowing the incentive to make ZeniMax content exclusive post-close, after the [European Commission] cleared the transaction, Microsoft plans for three of the newly acquired titles to become exclusive to Microsoft’s Xbox consoles and Xbox Game Pass subscription services,” the FTC writes.

If acquired, the FTC argues, Microsoft will likely do the same.

Microsoft has argued differently since the acquisition, claiming it has offered Sony a 10-year deal to keep publishing “Call of Duty” on the PlayStation platform. Xbox head Phil Spencer has said repeatedly in interviews that Microsoft wants the title to remain accessible to all. But Sony does not believe it and has been crucial to regulators’ case in the European Union.

The suit also focuses on Xbox Game Pass, Microsoft’s subscription-based video game service that allows users to pay a flat monthly fee in exchange for a library of hundred of game titles. Microsoft already includes its own first-party titles, like “Halo”, “Forza” and “Flight Simulator,” in Game Pass on the first day of their release.

While a deal between Activision and Sony currently exists that prevents “Call of Duty” from landing on Game Pass “for a number of years,” FTC regulators are concerned that publishing Activision titles on the service will give Microsoft an unfair competitive advantage.

“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Microsoft president Brad Smith said in a statement Thursday to CNBC. “We have been committed since Day One to addressing competitive 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.”

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Crucial to the FTC’s case is a point that game development and publishing are consolidating. In its argument, it says that only five non-console manufacturing developers are considered giants: Electronic Arts, Ubisoft, Epic Games, Take-Two and Activision. Then there are Microsoft and Sony themselves. The FTC argues that by taking Activision off the board of independents, Microsoft hurts competition significantly.

The case also puts a big focus on Microsoft in a way antitrust regulators have not in more than two decades. Since President Joe Biden nominated FTC chairwoman Lina Khan in March 2021, there has been a mostly fulfilled expectation that the FTC will go on the offensive against Big Tech. And it has, filing a case against Facebook parent Meta over its acquisition of a fitness app and reportedly probing several other issues around Amazon, Apple and Google. It has also gotten involved in Epic Games’ ongoing antitrust suit against Apple.

Microsoft, though, unlike “The Four,” has avoided regulatory scrutiny since its landmark antitrust in 2001 around technical barriers preventing users from uninstalling Internet Explorer on Windows computers. Microsoft has not stopped acquiring in that time, though—especially in the games industry, picking up the like of Mojang (the developers of “Minecraft”), Bethesda (the developers of “Fallout” and “Elder Scrolls”) and Obsidian (who went on to make “Outer Worlds”). Regulators have not batted an eye and allowed Microsoft to build a gaming empire without pushback.