Video games: Washington wants to block Microsoft’s takeover of Activision

Written 8 Dec. 2022 at 21:31

The file is complicated for Microsoft. On Thursday, the US competition authority asked to block Microsoft’s proposed acquisition of US video game publisher Activision Blizzard. The Federal Trade Commission (FTC) believes that such a takeover “would give the Xbox maker control over leading video game franchises, which would allow it to harm competition in high-performance game consoles and subscription services,” according to a statement.

At $69 billion (€65 billion), the proposed acquisition is the largest ever recorded both for Microsoft and for the entire video game sector. With Activision’s flagship successes such as Call of Duty, World of Warcraft, Diablo and Overwatch, the operation would make the group the world’s number three in video games by revenue, behind China’s Tencent and Japan’s Sony (Play station).

Concessions

Since announcing the operation in January, the group of Redmond (Washington State) knows that it is under the watch of antitrust regulators. Earlier this week, the computer giant tried to appease regulators with concessions. The company thus ensured that Call of Duty, one of Activision’s flagship games, would be available for ten years on Nintendo.

Not enough for the FTC. Microsoft already has (with the Xbox Series S and X) “one of only two types of high-performance video game consoles”, but also, with Xbox Game Pass, a “subscription service for premium video game content, as well as a cutting-edge cloud-based video game streaming service, « the details of the complaint.

With control of Activision, Microsoft would also have the “means and motivation” to harm competition and ultimately consumers “by manipulating Activision’s prices, degrading the quality of Activision’s games or the experience players have on rival game consoles and services”. Microsoft could also change “the terms and schedule of access to Activision content” or “completely deny content to competitors,” the FTC illustrates.

Previous practice

To support its analysis, the federal agency points to Microsoft’s past practices. On the occasion of the purchase of ZeniMax, publisher of Bethesda Softworks games, “Microsoft has decided to make several Bethesda titles, including Starfield and Redfall, Microsoft exclusive”, contrary to the assurances given to the European antitrust authorities, the ‘authority’ points out.

The FTC’s position, led by Lina Khan and taken by three votes to one, does not sign the end of the proceedings. A formal hearing must still be held before an administrative law judge. “We have full confidence in our case and are pleased to have the opportunity to present it to the court,” Brad Smith, Microsoft’s president, responded in a tweet following the FTC’s announcement.

In any case, the doctrine described by the federal agency will be particularly scrutinized by companies: the Biden administration, since its arrival at the helm in early 2021, has advocated a competition policy more concerned with the interests of consumers.

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