Feds are likely to challenge Microsoft's $69 billion acquisition of Activision

Microsoft's $69 billion acquisition of Activision

According to three sources with knowledge of the situation, the Federal Trade Commission is poised to bring an antitrust complaint to prevent Microsoft's $69 billion acquisition of Activision Blizzard, the developer of the popular titles Call of Duty and Candy Crush.

The FTC's boldest action yet under Chair Lina Khan to restrain the influence of the major technology giants would be to file a complaint. It would also be a serious setback for Microsoft, which, following its own arduous regulatory antitrust battles throughout the world more than two decades ago, has positioned itself as a sort of white knight on antitrust concerns in the IT sector.

It's not certain that the acquisition will be challenged in court, and according to two of the sources, the FTC's four commissioners haven't met with the firms' attorneys or approved a complaint. According to those persons, the FTC staff members who are scrutinizing the purchase are suspicious of the corporations' claims.

The persons with knowledge of the inquiry stated that while the probe is still ongoing, most of the hard work has been done, including the depositions of Microsoft CEO Satya Nadella and Activision CEO Bobby Kotick. The individuals, who all requested anonymity to discuss a private subject, said that if the agency does move through with a case, it could happen as soon as next month.

Whether buying Activision would give Microsoft an unfair advantage in the video game business is at the heart of the FTC's worries. In the gaming business, Sony Interactive Entertainment and its PlayStation system are the leaders, with Microsoft's Xbox coming in third. Sony, meanwhile, has emerged as the deal's main foe, complaining to the FTC and international authorities that Sony would suffer greatly if Microsoft made popular games like Call of Duty exclusive to its platforms.

The FTC chose not to respond.

Sony claims that the transaction would impair its ability to compete and reduce consumer and developer options for gaming in a statement submitted in October to the UK's Competition and Markets Authority stating its stance. The document was published on Wednesday. Sony said that Microsoft is a "Tech Titan" who is spending $68.7 billion to acquire irreplaceable material in order to eliminate competition.

Microsoft charges Sony of making self-serving comments to retain its dominance in the game industry in its own statement, which was also made public by the UK regulator on Wednesday. The idea that the smallest of the three console competitors, Xbox, could foreclose the current market leader, Sony, with demonstrable and durable market dominance as a result of losing access to one title, is not plausible.

Microsoft asserted that Sony has consistently broken its pledge to maintain Call of Duty on the PlayStation and that the game is also not the essential purchase Sony claims it to be. Furthermore, according to Microsoft, adding the game to the Xbox service in the future would not be detrimental to Sony as it is not now accessible through any subscription services.

According to two of the sources with knowledge of the situation, Google is also somewhat opposed to the purchase. Owning Activision would increase Microsoft's motivation to deliberately lower the quality of its Game Pass subscription service when used with Google's Chrome operating system, the sources said. This would ultimately drive hardware sales away from Google and toward Microsoft.

Google is a small participant in the gaming sector and is closing down Stadia, its own online gaming platform. It is, however, under antitrust investigation on a global scale, notably for actions in the gaming business, and is not likely to be a sympathetic adversary. The creator of Fortnite, Epic Games, is presently suing Google, alleging that the company is improperly preventing Fortnite from being downloaded via Google Play. In connection with that dispute, Epic recently said that Google paid Activision $360 million to prevent it from providing a rival app store for Android phones.

A representative at Google declined to comment.

In addition to promising to keep Call of Duty on Sony's Playstation platform, Microsoft recently offered Sony an offer to grant Sony access to the game for the subsequent ten years. The New York Times broke the news of the offer first. Sony did not reply to a request for comment on Wednesday, so it is unknown how it reacted to the offer.

According to two sources with knowledge of the review, the FTC's worries go beyond Call of Duty, as investigators are attempting to ascertain how Microsoft can use upcoming, undisclosed games to expand its gaming business.

"It is entirely illogical to assume that the transaction would have negative anticomp repercussions. Since we are up against more fierce competition from outside, this combination will help players and the US gaming industry, according to Activision spokeswoman Joe Christinat. We pledge to keep cooperating with regulators throughout the world to allow the acquisition to go through, but if necessary, we won't hesitate to defend it in court.

Activision rejects Epic's accusations as well. The claims made by Epic are false, according to Christinat. We have previously provided papers and evidence that demonstrate that Google never requested, coerced, or forced us to agree not to compete with Google Play.

In order to guarantee that the purchase closes with confidence, Microsoft, according to spokesman David Cuddy, "is prepared to address the concerns of regulators, including the FTC and Sony. After the merger is complete, we'll still be behind Sony and Tencent in the market, but Activision and Xbox will benefit players and developers and increase competition in the sector.

Technically, the FTC is under no need to do anything right now. Regulators in Europe and the UK have also just started thorough investigations, so the firms wouldn't be able to finalize the merger until the spring at the earliest. So, if the FTC decides to file a lawsuit, it will probably do so in its own internal administrative court.

Usually, the agency challenges transactions in federal court first, securing a temporary injunction against them until a hearing in its internal court. However, it would be challenging to get a temporary injunction if there was no imminent danger of the sale happening.

Without revising the agreement, the firms have until July of the following year to complete the transaction. The corporations may be forced to terminate the agreement if an administrative lawsuit were to be brought in January or later this year. Its resolution is unlikely to occur before July.

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