Last week wasn’t a good week for Microsoft. Fans were disappointed the company raised the prices for its video games and its first-party games were noticeably absent during The Game Awards. Gamers were hoping to get a sneak peek at the new titles that will have a $70 during the awards show.
To make matters worse, the Federal Trade Commission has moved to sue Microsoft in an attempt to block its acquisition of Activision Blizzard.
The commissioners voted 3-1 in favor of taking legal action against Microsoft. Republican Commissioner Christine S. Wilson was the sole commissioner voting against the action.
The FTC said that the deal is illegal since it would give Microsoft “the ability and increased incentive to withhold or degrade Activision’s content in ways that substantially lessen competition—including competition on product quality, price, and innovation. This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” FTC commission Holly Vedova said in a statement. “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.”
Microsoft President, Brad Smith, later issued a statement in response to the FTC, saying:
We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC. 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.”
The FTC highlighted in its complaint that Microsoft has previously suppressed competition from its rival when it acquired ZeniMax Media, the parent company of Bethesda Softworks. After the acquisition, Microsoft announced upcoming games like Starfield and Redfall will be exclusive to Microsoft platforms, despite giving the EU Commission its assurance that it would do otherwise.
However, the EU Commission clarified Microsoft didn’t give such an assurance during the approval of the ZeniMax acquisition last year as it “cleared the Microsoft/ZeniMax transaction unconditionally.” Additionally, the EU Commission concluded “the transaction would not raise competition concerns.”
The FTC filed the case in its administrative court as it did not need a temporary injunction from a federal court to stop the deal. Microsoft cannot close the deal as investigations by the UK CMA and European Commission are ongoing.
This is a significant blow to the deal between Microsoft and Activision Blizzard. Activision Blizzard CEO Bobby Kotick penned a letter to staff to reinforce their confidence. According to Kotick, “the allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge.”
Microsoft and Activision Blizzard have until July 2023 to finalize the deal without the need to renegotiate its terms. The EU Commission and UK CMA have until March to submit the results of their investigations.
The redacted FTC complaint can be found here.
