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Microsoft-FTC dispute over Activision deal hits court

Wildly popular Call of Duty game at the center of the antitrust tussle

The battle over Microsoft's controversial $69 billion bid for game-maker Activision Blizzard is due to shift to the courtroom Tuesday for the first pre-trial hearing in the Federal Trade Commission's lawsuit to block the deal.

A federal judge set January 3 as the date for the hearing after both Microsoft and Activision filed their arguments in favor of the sale on December 22, 2022.

The FTC wants to halt the proposed acquisition over antitrust concerns, particularly as it involves such highly popular games like Call of Duty. Regulators worry that Microsoft gaining control of that and other game franchises for its Xbox consoles would unfairly disadvantage competitors, including Sony and Nintendo.

They pointed to Microsoft's acquisition of ZeniMax – parent of game-maker Bethesda Software – in 2021 and its decision to make many of Bethesda's games exclusive to Xbox.

"Microsoft has already shown that it can and will withhold content from its gaming rivals," Holly Vedova, director of the FTC's Bureau of Competition, said in a statement last month announcing the lawsuit. "Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets."

In statements and court filings, Microsoft has noted that after 20 years in the game console market, it stills ranks third behind Sony and Nintendo. Buying Activision – the deal was announced in January 2022 – will help it better compete and grow its presence in the fast-expanding mobile gaming space. Activision in the third quarter 2022 generated about $932 million in revenue through its mobile and related businesses.

Microsoft also said it was in its best interest to make Call of Duty and other games more affordable and available on more platform, adding that it has offered deals to Nintendo and Sony to make those games available on their consoles for at least a decade.

"The acquisition of a single game by the third-place console manufacturer cannot upend a highly competitive industry," Microsoft claimed in the December 22, 2022, court filing. "That is particularly so when the manufacturer has made clear it will not withhold the game… Giving consumers high-quality content in more ways and at lower prices is what the antitrust laws are supposed to promote, not prevent."

The Biden Administration in 2021 issued an executive order to agencies like the FTC to more aggressively enforce antitrust regulations, warning about the dangers of ongoing corporate consolidation, including in the tech industry, which it says has led to higher consumer prices, lower wages, and unfair competition.

Microsoft and Activision are now feeling the sting of that more proactive regulatory approach.

The US is not the only place the proposed deal is getting scrutiny. Both the UK and EU are both running in-depth investigations into the acquisition, though other countries – most recently Chile, but also Brazil, Saudi Arabia, and Serbia – have approved it.

The Communications Workers of America union also is calling on the FTC to approve the acquisition. ®

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