Microsoft now owns Activision Blizzard, after dodging roadblocks from several government agencies around the world.
Sara Morrison is a senior Vox reporter who has covered data privacy, antitrust, and Big Tech’s power over us all for the site since 2019.
Editor’s note, October 13, 11:10 am ET: After finally winning approval from British regulators, Microsoft has closed its purchase of Activision Blizzard. It’s unclear how this will affect Xbox owners and other gamers, but the completion of the deal represents a major blow to the FTC’s effort to rein in Big Tech. The original story, which was last updated on July 17, is below:
Microsoft’s $69 billion merger with Activision Blizzard seems all but inevitable now: Sony is finally playing along. Microsoft’s main rival and opposition to the acquisition just signed a deal to keep Activision’s Call of Duty on its PlayStation consoles pending the merger’s completion. The deal is a significant sign that Sony believes the acquisition will happen.
The deal, which Microsoft Gaming CEO Phil Spencer announced on Twitter on Sunday, will require Microsoft to make Call of Duty titles available for PlayStation for the next 10 years, a Microsoft spokesperson confirmed to Vox. Sony’s stated fears that Microsoft would pull Call of Duty from PlayStation platforms were one of the Federal Trade Commission’s major arguments in its lawsuit to block the merger.
But the FTC’s gambit suffered a major blow last week when a federal judge denied its request for a preliminary injunction to stop the merger before the trial is scheduled to begin in August. The FTC’s appeal of the decision was denied a few days later. That gives the companies the green light to complete their merger, although it could be undone should the FTC win its lawsuit. At this point, however, it’s exceedingly unlikely that the FTC will continue its case at all; it usually drops lawsuits like this when it loses the preliminary injunction to block them.
“We’re grateful to the court in San Francisco for this quick and thorough decision and hope other jurisdictions will continue working towards a timely resolution,” Brad Smith, vice chair and president of Microsoft, said in a statement about the initial decision to deny the preliminary injunction.
“We are disappointed in this outcome given the clear threat this merger poses to open competition in cloud gaming, subscription services, and consoles,” FTC spokesperson Douglas Farrar told Vox at the time of the initial decision.
The FTC sued Microsoft and Activision Blizzard last December to stop their planned $69 billion merger, saying the deal would unfairly harm competition in a gaming market worth hundreds of billions of dollars. Microsoft will become the third-largest gaming company in the world, behind Tencent and Sony, if the deal goes through. But the agency didn’t have the authority to stop the acquisition from happening in the meantime, hence the injunction request. Judge Jacqueline Scott Corley said she didn’t think the FTC would win its case and so wouldn’t stop the companies from merging.
“The FTC has not shown it is likely to succeed on its assertion the combined firm will probably pull Call of Duty from Sony PlayStation, or that its ownership of Activision content will substantially lessen competition in the video game library subscription and cloud gaming markets,” the judge wrote.
It’s a big setback for an agency that has, under chair Lina Khan, intensely scrutinized mergers and acquisitions that will make big companies even bigger, giving them a larger share of a market with fewer competitors in it. The court losses show the uphill battle the agency faces going up against massive companies in a country whose courts typically favor businesses.
Big Tech isn’t the only industry the FTC has focused on, but its size and power — Apple, Microsoft, Google, Amazon, and Meta are in the top 10 largest companies in the world by market cap as of this writing — makes it an obvious target, one Khan focused on in her pre-FTC work. Under her, the agency continued its lawsuit against Meta that seeks to unwind its acquisitions of Instagram and WhatsApp, recently sued Amazon over how difficult the company allegedly makes it to cancel Prime, and settled with Google over a deceptive advertising case. It has yet to win any major victories here, but such cases may take years, if not decades, to resolve. The FTC hasn’t challenged some Big Tech mergers, like Amazon’s acquisition of MGM, and its already lost a few other battles, like its case against Meta’s acquisition of VR game company Within. When the FTC lost a similar bid to get an injunction to prevent that merger, it dropped the case. It wouldn’t be at all surprising if it did the same now.
The weeklong hearing over the preliminary injunction touched on several parts of Microsoft’s business, but the big argument appeared to center on the Call of Duty franchise and if Microsoft would continue to make it available for rival Sony’s PlayStation should it be allowed to acquire Activision. Corley said she believed the evidence showed that more consumers would get access to Call of Duty and other Activision games, rather than fewer. Microsoft has a deal to bring Call of Duty to Nintendo Switch consoles for at least 10 years if the merger closes, for example.
Should the FTC drop the case, Microsoft still has one boss left in its merger battle: the United Kingdom’s Competition and Markets Authority, which blocked it over concerns that it would harm the nascent cloud gaming market. But there are signs that it may have found a way to get the UK’s approval after all: the authority and Microsoft jointly asked to delay their hearing before the Competition Appeal Tribunal, which is hearing that request today. This suggests that the CMA might be amenable to approving the merger if Microsoft makes certain concessions. The European Union has already approved the merger.
Update, July 17, 12 pm ET: This story, originally published on July 11, has been updated to include comment from Microsoft and the FTC, the FTC losing its appeal, Sony’s Call of Duty deal, and the hearing before the Competition Appeal Tribunal.
Source: vox.com
