Report: FTC “likely” To File Suit To Block Microsoft/Activision Merger - Gatous News

Report: FTC “likely” to file suit to block Microsoft/Activision merger

Enlarge / Just a few of the Activision franchises that will become Microsoft properties if and when the acquisition is finalized.

Microsoft / Activision

The Federal Trade Commission will “likely” move to file an antitrust lawsuit against Microsoft and Activision Blizzard to block the companies’ planned $69 billion merger deal. That’s according to a new Politico report citing “three [unnamed] people with knowledge of the matter.”

While Politico writes that a lawsuit is still “not guaranteed,” it adds that FTC staffers “are skeptical of the companies’ arguments” that the deal will not be anticompetitive. The sources also confirmed that “much of the heavy lifting is complete” in the commission’s investigation, and that a suit could be filed as early as next month.

Sony, the main opponent of Microsoft’s proposed purchase, has argued publicly that an existing contractual three-year guarantee to keep Activision’s best-selling Call of Duty franchise on PlayStation is “inadequate on many levels.” In response, Microsoft Head of Xbox Phil Spencer has publicly promised to continue shipping Call of Duty games on PlayStation “as long as there’s a PlayStation out there to ship to.” It’s not clear if the companies have memorialized that offer as a legal agreement, though; The New York Times reported this week that Microsoft had offered a “10-year deal to keep Call of Duty on PlayStation.”

Numerous statements from Microsoft executives, including Spencer, have suggested the company is less interested in bolstering its position in the “console wars” and more interested in boosting its mobile, cloud gaming, and Game Pass subscription offerings. Beyond Call of DutyPolitico reports that the FTC is concerned about how Microsoft “could leverage future, unannounced titles to boost its gaming business.”

Microsoft “is prepared to address the concerns of regulators, including the FTC, and Sony to ensure the deal closes with confidence,” spokesperson David Cuddy told Politico. “We’ll still trail Sony and Tencent in the market after the deal closes, and together Activision and Xbox will benefit gamers and developers and make the industry more competitive.”

Plenty of speed bumps remain

The reports of a potential FTC lawsuit add to a growing list of troubling signals about the proposed purchase from various international governments. Earlier this month, the European Commission said it was moving on to an “in-depth investigation” of the deal. In the UK, a similar “Phase 2” investigation by the country’s Competition and Markets Authority has scheduled hearing for next month.

Those international investigations are expected to wrap up in March, ensuring the proposed deal won’t close before then and giving the FTC some time before it would have to file suit. Any such lawsuit would need to be approved by a majority of the four current FTC commissioners and would likely start in the FTC’s administrative court. And whatever the outcome, legal maneuvering in the case could easily delay the planned merger past a July 2023 contractual deadline, at which point both companies would have to renegotiate or abandon the deal.

An FTC lawsuit in this matter would also be a the strongest sign yet of a robust antitrust enforcement regime under FTC chair Lina Kahn, a big tech skeptic who was named to the post in June. Back in July, Kahn announced an antitrust lawsuit against Meta (formerly Facebook) and its proposed $400 million purchase of Within, makers of VR fitness app Supernatural.

Three months after Microsoft’s proposed purchase was announced in January, a group of four US Senators wrote an open letter strongly urging the FTC to take a close look at the deal. Last month, merger news site Dealreporter said FTC staff had expressed “significant concerns” about the deal. And this week, the New York Times cited “two people” in reporting that the FTC had reached out to other companies for sworn statements laying out their concerns about the deal, a possible sign of lawsuit preparations.

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