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FTC files lawsuit against Microsoft over Activision Blizzard deal

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The U.S. Federal Trade Commission (FTC) has filed an antitrust lawsuit against Microsoft to prevent the mega-tech company from acquiring Call of Duty publisher Activision Blizzard in a $69 billion contract.

The FTC cited concerns about market monopoly by Microsoft. The acquisition would allow the company to “suppress” competitors, including through its Xbox consoles.

“would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business”

Lisa Tanzi

The FTC also pointed out that Microsoft had contradicted its promise to European Union antitrust regulators back in 2021. Last year, the company acquired Bethesda Softworks’ gaming content and assured it would not make those games exclusive to its consoles. Microsoft, however, locked some games to its ecosystem.

Large gaming companies often make popular game franchises available only on their consoles and services. Loyal players of certain games are likely to purchase only particular consoles to access their favorite games.

Microsoft acquired ZeniMax — which published iconic games like Fallout and The Elder Scrolls — for $7.5 billion in 2021. Following the acquisition, Microsoft made ZeniMax’s most anticipated project, Starfield, exclusive for PC and Xbox. The game is scheduled for launch in 2023.

Microsoft first announced the ZeniMax acquisition deal in January this year. If it goes through, the company would be the third-largest global gaming company by revenue, behind Chinese publisher Tencent and Japanese conglomerate Sony. According to Microsoft, acquiring Activision Blizzard can help develop its Xbox Cloud Gaming service, thanks to Activision’s King subsidiary.

Xbox Cloud Gaming allows players to play video games without using expensive consoles or PCs. Subscribers can instead use less powered devices like smartphones, laptops and smart TVs. This service has grown rapidly in 2022, with Microsoft CEO Satya Nadella said as of October, 20 million people had used the cloud gaming service as opposed to 10 million users in April.

From 1998 to 2001, Microsoft also dealt with an antitrust battle with the U.S. government, which accused the company of blocking third-party software on Windows computers. Analysts said the long battle partially caused Microsoft to miss out on competition against Apple and Google during the rise of smartphones.

Previously, Microsoft general counsel Lisa Tanzi said the company was committed to resolving the issue with the authorities.

“We’re committed to answering questions from regulators and ultimately believe a thorough review will help the deal close with broad confidence, and that it will be positive for competition,” Tanzi said.

Other parties looking into the deal

Other than the FTC, U.K.’s Competition and Markets Authority and the European Commission are also reviewing the acquisition contract. Like the U.S. authorities, the CMA believes that the acquisition would reduce competition in the U.K.

Sony has also lobbied global regulators to prevent the deal from going through. The company had a stake as well in the matter. Sony said the acquisition would cut the company entirely from Call of Duty. Although Activision Blizzard offers other notable game franchises, such as World of Warcraft, Call of Duty has the largest market size.

Within ten days after launching, the latest Call of Duty edition, Call of Duty: Modern Warfare II, recorded more than $1 billion in sales. The new Call of Duty Warzone 2.0 is also expected to garner massive revenue throughout 2023.

Responding to Sony’s statement, Microsoft gaming division vice president Phil Spencer said that the company would still make Call of Duty available on Sony’s PlayStation. Microsoft added that it would agree to a 10-year legally binding agreement to make the game available on the platform.