Will Microsoft’s $69 Billion Activision Acquisition Succeed? Not If the FTC Can Help It

The FTC is playing for big stakes as it sues to block Microsoft’s acquisition deal. It goes further than the tech giant’s bottom line as the FTC aims to revamp antitrust rules, even if it loses the case. The $69 billion acquisition of Activision is also a test of how far Big Tech can expand and whether it can happen amid backlash.

Blocking the acquisition: The Federal Trade Commission announced its decision to sue Thursday, claiming the deal would put Microsoft in a position to suppress competitors to its Xbox console and games subscription business.

• The decision was made after a closed-door meeting that saw the FTC vote 3-1 in favor of filing the complaint.
• If the acquisition goes through, it will make Microsoft the third-largest video game publisher in the world, giving it “means and motive to harm competition.”
• The acquisition stands to be the largest consumer technology deal in two decades.

How would the deal suppress competitors? The concern is over Microsoft gaining Activision’s major titles, such as Call of Duty. That would potentially allow Microsoft to lure customers away from rivals, especially if the games are made exclusive. However, Microsoft has claimed there is no intention to make the titles exclusive.

• In an attempt to assure regulators, Microsoft has offered Sony and Nintendo deals to give them access to the Call of Duty franchise for ten years if the deal closes.
• Brad Smith, Microsoft’s president, spoke about believing the deal would “expand competition and create more opportunities for gamers and game developers.” He also said that Microsoft has been “committed since day one to addressing competition concerns.”

Microsoft is ready to fight the case in court, even if they are trying to reassure regulators and move on. Smith said, “While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.”

Bobby Kotick, Activision’s chief executive, also stated his belief that the deal would close. “The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” he wrote in an email to Activision employees.

The case might prove difficult to win for the FTC. Experts have pointed out that Microsoft and Activision do not compete directly, making it a vertical merger and reducing monopoly concerns. There are also the aforementioned concessions giving other companies rights to Call of Duty, which might prove persuasive to a judge.

That being said, the FTC is not the only regulator involved. There are a total of 16 regulators around the world reviewing the deal, which could cause a considerable amount of pressure.

• The key regulators include the FTC and regulators in Britain and the European Union. The FTC was the first of the three to make a decision.
• Some believe the FTC is trying to push European regulators into speaking up while making the deal more difficult for Microsoft and Activision.

Challenging the tech giants: The move to block the deal is meant to stop Microsoft from gaining more ground in the video-game industry, but FTC chair Lina Khan is also aiming to rein in Big Tech. Part of that involves revamping antitrust when it comes to Big Tech and mergers.

Khan argues that the approval of vertical mergers ignores how they affect issues like innovation. Moreover, she is prepared to argue it out in court, even if it proves unsuccessful. She believes long-shot lawsuits might expand the boundaries of competition regulation, even if they do not always win in court.