US competition body FTC seeks to block Microsoft/Activision deal

The USA’s Federal Trade Commission (FTC) is seeking to block technology giant Microsoft from acquiring leading video game developer Activision Blizzard and its blockbuster gaming franchises such as Call of Duty. The FTC alleges that the $69 billion deal would enable Microsoft to “suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business”.

In a complaint issued today, the FTC pointed to Microsoft’s record of acquiring and using valuable gaming content to suppress competition, including its acquisition of ZeniMax, parent company of Bethesda Softworks. According to the FTC, Microsoft made several Bethesda’s titles exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rivals.

“Microsoft has 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.”

Activision currently has a strategy of offering games like Call of Duty, World of Warcraft, Diablo, and Overwatch on many devices regardless of producer. But the FTC says that could change if the deal is allowed to proceed. “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 content, or withholding content,” said the FTC.

The process involves the Commission issuing “administrative complaint”. This marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge. The prevailing view is that the FTC has become more interventionist under Joe Biden’s Presidency. Already this year it has blocked Paramount Global’s $2.2bn sale of Simon & Schuster to Penguin Random House