The Federal Trade Commission (FTC) sued Microsoft on December 8 to block its $68.7 billion acquisition of Activision Blizzard. The deal is Microsoft’s most expensive corporate takeover ever and the largest in video game industry history. Regulators worldwide have scrutinized the acquisition, with the UK’s Competition and Markets Authority (CMA) in the midst of an investigation. Here’s why the FTC sued Microsoft to block the Activision Blizzard deal.
The Activision Blizzard deal “would enable Microsoft to suppress competitors” in the video game industry.
Microsoft’s Xbox console represents one of three major players in the video game console market. The other two are Sony’s PlayStation and Nintendo’s Switch. Yet, despite the Washington-based tech giant’s best efforts, the FTC still has doubts Microsoft will acquire Activision Blizzard in good faith.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said the FTC’s Holly Vedova. “[W]e seek to stop Microsoft from [controlling] a leading independent game studio and using it to harm competition […].” Vedova is the director of the Federal Trade Commission Bureau of Competition.
Additionally, at the heart of the matter is Activision Blizzard’s seminal first-person shooter franchise, Call of Duty (CoD). The FTC and other antitrust regulators fear that Microsoft would make CoD exclusive to Xbox consoles. Since its inception, every CoD game has appeared on PlayStation, Xbox, and PC, and several titles on Nintendo consoles. The most recent release, Call of Duty: Modern Warfare II (2022), made over $1 billion in less than two weeks.
Microsoft offered deals to Nintendo and Sony in an attempt to stave off regulators.
On December 6, Microsoft Gaming CEO and the head of Xbox, Phil Spencer, announced a ten-year deal with Nintendo. The partnership will bring Call of Duty back to Nintendo consoles for the first time since 2013’s CoD: Ghosts. Additionally, the company offered a similar deal to Sony to ensure the franchise stayed on PlayStation, which Sony subsequently rejected.
Despite the FTC’s allegations, Microsoft maintains that keeping CoD on every platform is best for business. Also, Microsoft President Brad Smith said making Call of Duty an Xbox exclusive would be “disastrous” for the franchise. He added that Microsoft is willing to make the deals with console competitors legally enforceable by regulatory agencies worldwide.
