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The Federal Trade Commission on Thursday sued to block Microsoft’s $69 billion bid to buy video game publisher Activision Blizzard, alleging that the deal will enable the tech giant to suppress competition in gaming.
The move represents another aggressive step taken by competition regulators to rein in consolidation of the tech industry. It marks a roadblock in Microsoft’s plans to expand its gaming arm. The deal, if approved, would’ve married Microsoft, which owns the Xbox console and a game streaming service, and Activision, maker of Call of Duty, Warcraft and Candy Crush.
The FTC said that the proposed transaction would enable Microsoft to stifle competition to Xbox and its “rapidly growing” game streaming service. It pointed to the tech giant’s history of acquiring competitors to “suppress competition from rival consoles,” including its purchase of ZeniMax, parent company of Bethesda Softworks and maker of The Elder Scrolls, Fallout and Starfield.
“Microsoft has already 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.”
The commission voted along party lines to challenge the acquisition, the largest ever in the video game industry, with three Democrats voting in favor of suing and one Republican against.
Microsoft said it won’t forgo the acquisition and will pursue approval in court.
“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Brad Smith, Microsoft’s president, said in a statement. “We have been committed since day one to addressing competition concerns, including by offering earlier this week proposed concessions to the F.T.C. 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.”
Activision indicated that it remains confident the deal will close.
“The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” Bobby Kotick, the company’s CEO, said in a statement. He stressed that consumers “want choice, and this gives them exactly that.”
“We believe these arguments will win despite a regulatory environment focused on ideology and misconceptions about the tech industry,” he added.
The purchase is undergoing review by numerous government bodies. While Saudi Arabia and Brazil have approved the deal, the United Kingdom and European Union continue to investigate. The FTC is the first to sue to block the transaction, which is Microsoft’s largest acquisition in company history.
The lawsuit comes on the heels of concessions by Microsoft for the commission to greenlight the deal. In November, the company offered Sony a 10 year deal to keep Call of Duty on Playstation. It followed up on Tuesday by announcing that it reached a deal with Nintendo to make the first-person shooter available on Nintendo consoles if the deal closes in a last-minute bid to secure approval.
To ease concerns that the merger will harm workers, Microsoft has pledged to remain neutral on unionization efforts. More than 300 employees at ZeniMax Media, a video game publisher owned by the company, has begun voting on whether to unionize. Microsoft said it will voluntarily recognize the union if employees vote in favor. The campaign has been spearheaded by the Communication Workers of America, the largest media union in the country that has over 700,000 members and supports the transaction.
In October, the Department of Justice won a case challenging Paramount’s bid to sell Simon & Schuster to Penguin Random House. The suit advanced a monopsony theory revolving around potential harm to top-selling authors if the $2.2 billion deal was approved.
Competition regulators have vowed to increasingly sue to block deals they believe are anticompetitive instead of allowing them to go through with certain conditions, such as structural or behavioral remedies. In July, the FTC challenged Meta’s purchase of virtual reality game developer Within in a bid to limit the company’s reach in the virtual reality market. The complaint advances relatively untested theories arguing that antitrust laws account for actions taken by a firm that isn’t yet a monopolist but is positioned to become one.
“The era of lax enforcement is over,” DOJ antitrust chief Jonathan Kanter said in April. “And the new era of vigorous and effective antitrust law enforcement has begun.”
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