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The suit filed on Tuesday in federal court in California alleges that the deal will suppress competition in the gaming industry. It comes less than two weeks after the Federal Trade Commission sued to stop Microsoft from finishing the largest deal ever in the video game market.
“If Microsoft’s proposed acquisition of Activision Blizzard is allowed to proceed, the video game industry may lose substantial competition, and Microsoft may have far-outsized market power, with the ability to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition,” reads the complaint.
A Microsoft representative in a statement countered that the merger will “expand competition and create more opportunities for gamers and game developers as we seek to bring more games to more people.” The company will pursue approval of the acquisition in court.
The deal, if approved, will marry Microsoft, which owns the Xbox console, a game streaming service and the most popular personal computing operating system in the world, and Activision, maker of Call of Duty, Warcraft and Candy Crush.
The suit, brought on behalf of 10 gamers in California, New Jersey and New Mexico, argues that the merger will create one of the largest video game companies, with the ability to harm potential competitors. Microsoft could, for example, make its titles exclusive to Xbox.
Ahead of the FTC’s suit, Microsoft in November offered Sony a 10-year deal to keep Call of Duty on Playstation. It followed up 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. Microsoft will likely argue that its proposed fixes address any potential harms to competition.
The suit, however, claims that the company’s offers don’t account for scenarios like releasing Activision titles on rival consoles at a later date than Xbox, degrading the quality of games on other platforms and making certain features exclusive to Xbox.
Microsoft could also foreclose Activision content on rival operating systems, according to the complaint. While Activision’s games are currently all developed for Mac in addition to Windows, the company could change course. After acquiring in 2020 ZeniMax Media, Microsoft made one of its most popular titles, Starfield, exclusive to Xbox and Windows despite assuring to European competition regulators that it wouldn’t limit ZeniMax games on rival consoles.
“Microsoft has currently made public promises to keep Activision Blizzard’s game content, including Call of Duty available on platforms owned and developed by competitors, like Sony’s PlayStation console, but their past history implies these promises are illusory,” the complaint reads.
In addition to the proposed acquisition harming consumers, the gamers also argue that the deal will reduce competition for workers in the video game industry. The suit claims that employees will have substantially less choice among employers and that Microsoft will have outsized market power in hiring and retaining workers.
The Department of Justice pursued a similar monopsony theory of a proposed deal harming workers in its suit seeking to block Paramount’s sale of Simon & Schuster to Penguin Random House. A federal judge in October sided with the government in the case.
Activision is currently fighting lawsuits from employees and the California Department of Fair Employment and Housing, alleging that it engaged in widespread gender discrimination and sexual harassment.
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