Microsoft and US government in court battle over acquisition of Activision Blizzard

Microsoft is gearing up for a high-stakes court battle with the US government. The Federal Trade Commission (FTC) is seeking to halt Microsoft’s $75 billion acquisition of gaming giant Activision Blizzard, with a hearing set to take place in federal court in San Francisco. This clash revives memories of the 1990s when the Department of Justice accused Microsoft of maintaining a PC monopoly through unlawful means. Although an order to break up the company was initially issued, it was later overturned and settled.

Call of Duty exclusive on Microsoft platform

The FTC’s move comes after the regulator recently filed for an injunction to block the deal until the resolution of a separate antitrust challenge. The agency argues that if the acquisition proceeds, Microsoft would have a financial incentive to turn Activision’s popular games, including the Call of Duty franchise, into exclusive properties available only on its own platforms. This, according to the FTC, would harm competition in the markets for console gaming, game libraries accessible through subscriptions, and cloud gaming.

The objections raised by the FTC go beyond those of the UK’s Competition and Markets Authority, which focused on potential harm to the emerging cloud gaming market. In contrast, the European Commission has approved the transaction. Microsoft and Activision have responded by stating that the price agreed upon for the acquisition was based on expanding game availability, not restricting it.

They also claim that even withholding the games would only have a minimal impact on Sony, as it still holds a significant lead in console gaming. Microsoft even offered Sony a 10-year license for Activision games, which was rejected by the Japanese company in what Microsoft perceives as an attempt to thwart the acquisition.

Countdown to complete acquisition

The pressure is mounting for Microsoft to complete the purchase before the FTC’s administrative law case begins, as the 18-month deadline expires on 18 July. Failing to close the deal would result in a $3 billion break-up fee. Both Microsoft and Activision have vigorously advocated for the acquisition to proceed as planned. If the FTC succeeds in blocking the immediate closure, the companies may consider extending their deal.

The CEOs of Microsoft and Activision, Satya Nadella and Bobby Kotick, respectively, are scheduled to testify in person during the five-day hearing.

Vertical Integration

Cloud gaming, game pass licensing and franchising games are anticipated to drive the growth of Microsoft’s gaming division.

Analysts see Microsoft’s attempt at vertical integration reflects the need to adapt to the ‘’Metaverse’’ landscape and achieve its vision of a single subscription-based online service. Microsoft has trails with its Xbox behind 바카라Station 5 and the Nintendo Switch and sees its future in cloud gaming.

Cloud gaming allows streaming games from servers, with no need for expensive consoles. Games can be played on devices like TVs, smartphones, and laptops. But for cloud gaming to succeed, an extensive catalogue of games users who can access via a subscription service is needed to explain Microsoft’s interest in the Activision library.

“We had a concern about cloud gaming, which is very nascent right now, but it will grow,” Margrethe Vestager, the EU’s top competition official, told reporters on Monday.

What prompted Activision Blizzard to sell

CEO of Activision, Robert Kotick, is reported to have stated that he and Microsoft’s CEO Satya Nadella had concerns over Tencent, NetEase, Apple and Google’s growing strength in the market. They believe that Activision Blizzard did not have the expertise in machine learning and data analytics needed to compete. Activision Blizzard is also believed to have talked with other suitors, including Facebook’s parent company Meta Platforms.

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