Last February, Microsoft announced it would purchase Activision Blizzard, which would raise its share in the gaming industry from 6.5% to 10.7%, according to data analytics firm Newzoo. After the announcement, Reuters called it the biggest deal in the history of the gaming industry. But yesterday, there was a plot twist: the Federal Trade Commission (FTC) announced that it is suing Microsoft to block the deal.
Why?
According to the FTC, Microsoft has a history of acquiring game studios to crush competition in the console market.
Who cares?
Sony and Nintendo. And the FTC.
“Call of Duty”, Activision’s biggest money maker, appears to be at the crux of the controversy. Yet Microsoft claims it has already made efforts to ensure equity across gaming consoles by allowing the game to be played on Sony and Nintendo for the next ten years via a licensing agreement– this may give Microsoft an enormous leg up in defending itself.
The New York Times addressed the uphill battle the FTC will likely face: “…courts have been skeptical of challenges to so-called vertical mergers, where the two businesses don’t compete directly. In this case, Microsoft is best known in gaming as the maker of the Xbox console, while Activision is a major publisher of blockbuster titles such as Call of Duty.”
Activision is in favor of the acquisition and sent out an internal email to reassure employees, citing in part:
“I wanted to provide a brief update on our pending merger with Microsoft. This week the U.S. Federal Trade Commission (FTC) announced its decision to challenge the deal. This means they will file a lawsuit to block the merger, and arguments will be heard by a judge. This sounds alarming, so I want to reinforce my confidence that this deal will close. The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge.” Bobby Kotick, CEO Activision Blizzard, Inc.
The deal was originally supposed to close in June 2023 but now with a legal battle, it will likely take longer.
Here are some documents from Microsoft and Activision Blizzard currently available on RealDealDocs:
Agreement And Plan Of Merger for ACTIVISION BLIZZARD, INC., Activision Blizzard, Inc, Anchorage Merger Sub Inc, MICROSOFT CORPORATION
Microsoft Corp 8-K
Amendment #1 To The Employment Agreement Between Brian Hodous And Activision Publishing, Inc
Court To Approve Activision Agreement With Eeoc for ACTIVISION BLIZZARD, INC.
Sources
A Letter from CEO Bobby Kotick Regarding Activision Blizzard’s Merger with Microsoft
Lina Khan, Aiming to Block Microsoft’s Activision Deal, Faces a Challenge
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