Microsoft is headed for a battle with the Federal Trade Commission over whether the U.S. will block the tech giant’s planned takeover of video game company Activision Blizzard.
Microsoft on Thursday filed a formal challenge to the FTC lawsuit’s declaring the $68.7 billion deal an illegal acquisition that should be stopped.
After years of avoiding the political backlash that has been directed at tech peers such as Amazon and Google, the software giant now appears to be on a collision course with U.S. regulators emboldened by President Joe Biden’s push to get tough on anti-competitive behavior.
The FTC claims the merger could violate antitrust laws by suppressing competitors to Microsoft’s Xbox game console and its growing Xbox Game Pass subscription business.
At the center of the dispute is Microsoft’s rivalry with PlayStation-maker Sony to secure popular Activision Blizzard franchises like the game Call of Duty.
The dispute could be a difficult test case for Biden-appointed FTC Chair Lina Khan, who has sought to strengthen enforcement of antitrust rules. The FTC voted 3-1 earlier in December to issue the complaint seeking to block the deal, with Khan and the two other Democratic commissioners voting in favor and the sole Republican voting against.
The deal is also under close scrutiny in the European Union and the United Kingdom, where investigations aren’t due to be completed until next year.
The FTC’s complaint points to Microsoft’s 2021 acquisition of game developer Bethesda Softworks and its parent company ZeniMax, as an example of where Microsoft is making some upcoming game titles exclusive to Xbox despite assuring European regulators it had no intention to do so.
The FTC’s suit describes top-selling franchises like Call of Duty as important because they develop a base of loyal users attached to their preferred console or streaming service.
“With control of Activision’s content, Microsoft would have the ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition — including competition on product quality, price, and innovation,” the FTC lawsuit says. “This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”
Microsoft signaled that it will vigorously fight the case in court with a team led by high-profile corporate attorney Beth Wilkinson.
“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,” said Microsoft’s president, Brad Smith, in a statement Thursday. “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.”
Microsoft’s last big antitrust battle occurred more than two decades ago when a federal judge ordered its breakup following the company’s anticompetitive actions related to its dominant Windows software. That verdict was overturned on appeal, although the court imposed other penalties on the company.
