The Federal Trade Commission (FTC), a government agency in charge of enforcing antitrust law and consumer protection in the United States, has issued a lawsuit against Microsoft over its planned $68.7 billion acquisition of Activision Blizzard. In a press release, the FTC explained it intends to block the merger because the deal “would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.”
The FTC argues that the deal would be detrimental to the health of the game industry because Microsoft could make future entries in popular Activision franchises into console exclusives, such as Call of Duty or Diablo. Specifically, it cites how the company recently acquired ZeniMax and then made the upcoming Bethesda titles Startfield and Redfall into Microsoft exclusives, despite having assured European antitrust bodies they would not withhold games from other consoles.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition. “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 the press release, the FTC also mentioned that if Microsoft were to lock Activision titles behind their subscription service Game Pass, they could further corner the game’s subscription market.
“Activision is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices, including video game consoles, PCs, and mobile devices,” the press release reads. “With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers.”
As per the FTC’s website, the regulatory body’s administrative complaint over the merger “marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.”
Since news of the lawsuit broke, Polygon gained access to an internal message sent by Activision CEO Bobby Kotick to Activision employees in which he assures his “confidence that this deal will close.” He later goes on to say, “We believe these arguments will win despite a regulatory environment focused on ideology and misconceptions about the tech industry.”
The FTC’s lawsuit follows Microsoft recently signing a deal with Nintendo to ensure Activision’s Call of Duty franchise will appear on its systems for at least 10 years if the merger were to go through. The move was an attempt to dissuade regulators from breaking up the acquisition. The merger was announced earlier this year, and if it were to go through, Microsoft would own several high-profile series and titles like Call of Duty, Overwatch, Candy Crush, and World of Warcraft.