Microsoft and Activision Fought FTC’s Attempt to Prohibit Their Merger

The US Federal Trade Commission (FTC) filed a lawsuit to stop Microsoft and Activision from merging. Microsoft and Activision have responded to the lawsuit.

The FTC said earlier this month that it would file a lawsuit to stop Microsoft from buying Activision for $69 billion. The FTC says that this would allow Microsoft to “suppress competitors” to its Xbox consoles, subscription content, and cloud gaming business.

Regulators who are looking into the deal are worried, among other things, that it could make it much harder for PlayStation to compete since Microsoft would own the Call of Duty series after the deal.

Microsoft and Activision filed long responses to the FTC’s complaint on Thursday. They said that the merger would be good for consumers because it would make the Call of Duty publisher’s games more widely available.

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“The acquisition of a single game by the third-place console manufacturer cannot upend a highly competitive industry,” Microsoft claimed. “That is particularly so when the manufacturer has made clear it will not withhold the game.”

“The fact that Xbox’s dominant competitor has thus far refused to accept Xbox’s proposal does not justify blocking a transaction that will benefit consumers. Giving consumers high-quality content in more ways and at lower prices is what the antitrust laws are supposed to promote, not prevent.”

In its complaint, the FTC said that Microsoft has a history of buying valuable games like Bethesda’s upcoming Starfield and Redfall and making them Xbox-only, even though it had told European antitrust authorities that it had no reason to keep games from competing consoles.

Microsoft rejected these claims in its response while confirming it “anticipates that three future [Bethesda] titles—[redacted], all of which are designed to be played primarily alone or in small groups—will be exclusive to Xbox and PCs”.

Microsoft could be talking about Starfield, Redfall, and The Elder Scrolls 6, all of which have already been confirmed as Xbox and PC-only games, or it could be talking about other games that haven’t been announced yet.

“Any suggestion that Microsoft’s statements to the European Commission about ZeniMax were misleading is incorrect. Microsoft explicitly said it would honor Sony’s existing exclusivity rights and approach exclusivity for future game titles on a case-by-case basis, which is exactly what it has done.”

“The European Commission agrees it was not misled, stating publicly the day after the Complaint that Microsoft did not make any ‘commitments’ to the European Commission, nor did the European Commission ‘rely on any statements made by Microsoft about the future distribution strategy concerning ZeniMax’s games’.”

In its answer to the FTC’s complaint, Activision said that the government agency was wrong about the competitive gaming industry and was “turning antitrust on its head.”

“The FTC ignores the significant benefits of the Transaction in favour of a warped attempt to ignore the facts and rewrite antitrust law and settled precedent to protect Xbox’s competitors from hypothetical harm that has no basis in marketplace realities,” it claimed.

Adding Activision’s content to multigame subscriptions and cloud gaming, where it wouldn’t have been available before, clearly improves output and gives users more ways and places to play Activision’s games.

Activision, and especially its King division, will also speed up Xbox’s mobile gaming business, which didn’t exist before. This would increase competition in the fastest-growing part of gaming. And in the end, the deal will give Activision’s game development studios more money and talent to work with, which will lead to more new games and technologies.

It continued: “The FTC’s disregard for these benefits to consumers and focus on supposed harms to Xbox’s deep-pocketed competitors betrays a fundamental disconnect between the FTC’s theories and the antitrust laws’ underlying purpose, which is to protect competition, not competitors. The FTC is asking this Court to protect the world’s largest gaming companies from further competition from Xbox, and thereby turning antitrust on its head.”

“Blinded by ideological scepticism of high value technology deals and by complaints from competitors, the FTC has not only lost sight of the realities of the intensely competitive gaming industry, but also the guiding principles of our nation’s antitrust laws.”

Both Microsoft and Activision also said that the way the FTC handled the merger was against the Constitution because it went against their rights under the Fifth Amendment to equal protection and due process.

In a statement to CNBC, Brad Smith, president of Microsoft, said that the company is still confident in its case but is still willing to look into other ways to make sure the deal goes through.

“Even with confidence in our case, we remain committed to creative solutions with regulators that will protect competition, consumers, and workers in the tech sector,” he said. “As we’ve learned from our lawsuits in the past, the door never closes on the opportunity to find an agreement that can benefit everyone.”

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