The feds will likely challenge Microsoft’s $69 billion acquisition of Activision

The investigation remains ongoing, but much of the heavy lifting has been completed, including depositions from Microsoft Chief Executive Officer Satya Nadella and Activision chief Bobby Kotick, those familiar with the investigation said. If the agency moves forward with a case, it could arrive as early as next month, the people said, who were granted anonymity to discuss a confidential matter.

Central to the FTC’s concerns is whether the Activision acquisition would give Microsoft an unfair push into the video game market. Microsoft’s Xbox is number three compared to industry leaders Sony Interactive Entertainment and its PlayStation console. Sony, however, has emerged as the main opponent of the deal, telling the FTC and regulators in other countries that if Microsoft makes blockbuster games like Call of Duty exclusively for its platforms, Sony would be significantly disadvantaged.

The FTC declined to comment.

In an October statement to the UK’s Competition and Markets Authority outlining Sony’s position and released on Wednesday, Sony says the deal will not only hurt its ability to compete, but also leave consumers with less choice for games and developers less choice of where to publish games. Microsoft is a “Tech Titan buying irreplaceable content at unquestionable prices ($68.7 billion) to turn the competition around,” Sony said.

In its own statement, also released by the UK regulator on Wednesday, Microsoft accuses Sony of making selfish statements to maintain its number one position in gaming. “The suggestion that reigning market leader, Sony, with clear and enduring market power, could be foreclosed on by the smallest of the three console competitors, Xbox, due to the loss of access to a title, is not credible. “.

Microsoft said it has repeatedly promised to keep Call of Duty available on Sony’s PlayStation, and furthermore, the game isn’t the must-have that Sony claims it is. Additionally, Microsoft notes that the game isn’t currently available on any subscription service, and adding it to the Xbox service in the future wouldn’t hurt Sony.

To a lesser extent, Google is also an opponent of the deal, according to two of the people familiar with the matter. The company said Microsoft intentionally degraded the quality of its Game Pass subscription service when used with Google’s Chrome operating system, and owning Activision would increase its incentive to do so, ultimately driving hardware sales towards Microsoft and away. from Google, the people said.

Google is a minor player in the gaming industry and is shutting down its online gaming service Stadia. However, it is under antitrust scrutiny worldwide, including for conduct in the gaming market, and is unlikely to be a sympathetic opponent. Fortnite maker Epic Games is currently suing Google, claiming it is illegally blocking Fortnite from its Google Play mobile app store. As part of that case, Epic recently accused Google of paying Activision $360 million not to offer a competing app store on Android phones.

A Google spokesperson declined to comment.

Microsoft has pledged to continue making Call of Duty available on Sony’s Playstation console and recently made an offer to give Sony access to the game for the next 10 years. The offer was first reported by the New York Times. It’s unknown how Sony responded to the offer, and it declined to return for comment on Wednesday.

However, the FTC’s concerns extend beyond Call of Duty, and investigators are trying to determine how Microsoft might leverage future, unannounced titles to boost its gaming business, according to two people familiar with the review.

“Any suggestion that the transaction could lead to anti-comp effects is completely absurd. This merger will benefit gamers and the gaming industry in the United States, especially as we face increasingly fierce competition from overseas,” said Activision spokesman Joe Christinat. “We are committed to continuing to work with regulatory authorities. regulation around the world to allow the transaction, but we will not hesitate to fight to defend the transaction if necessary.”

Activision also disputes Epic’s allegations. “Epic’s allegations are nonsense,” Christinat said. “We can confirm that Google has never asked, pressured or made us agree not to compete with Google Play, and we have already sent documents and testimonials to prove it.”

Microsoft spokesman David Cuddy said the company “is prepared to address the concerns of regulators, including the FTC, and Sony to ensure the deal closes in confidence. We will continue to follow Sony and Tencent into the market after the deal closes, and together Activision and Xbox will benefit gamers and developers and make the industry more competitive.”

The FTC technically doesn’t have to take any action at this point. Regulators in Europe and the UK also recently launched extensive investigations, meaning the companies may not finalize the deal until spring at the earliest. This means that if the FTC sues, it would likely take a case to its own domestic administrative court.

The agency typically challenges deals in federal court first to block them with a temporary injunction pending a trial in its domestic court. Without the imminent risk of closing the deal, however, a temporary injunction would be difficult to obtain.

The companies have until July next year to close the deal without renegotiating the deal. An administrative lawsuit filed later this year or in January is unlikely to be resolved by July and could potentially force the companies out of the deal.

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