FTC Sues to Stop Microsoft’s Activision Acquisition

It has only been about 11 months since Microsoft announced that it was planning to purchase Activision for $68.7 billion. However, that deal has hit a rather large bump in the road, as the Federal Trade Commission has sued to block the acquisition.

According to its site, the FTC alleges that the “maker of Xbox would gain control of top video game franchises, enabling it to harm competition in high-performance gaming consoles and subscription services by denying or degrading rivals’ access to its popular content.” Since Microsoft would own Call of Duty and many other franchises, it would be able to “suppress competitors to its Xbox gaming consoles” and “rapidly [grow its] subscription content and cloud-gaming business,” the latter of which points to Game Pass and Xbox Cloud Gaming.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Director of the FTC’s Bureau of Competition Holly Vedova. “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.”

The FTC notes that Activision’s current games like Call of Duty, World of Warcraft, Diablo, and Overwatch all have a combined 154 million monthly active users and the company has an incentive to offer those titles on as many platforms as possible. However, the FTC says that could change under Microsoft and it would have “both the means and motive” to manipulate prices, degrade game quality on other platforms, alter the timing and terms to Activision’s games, and withhold titles in addition to limiting competition in the subscription space. Microsoft’s Bethesda acquisition is also listed as part of its efforts to “suppress competition,” even calling out how Starfield and Redfall are Xbox and PC exclusives.

According to Axios reporter Stephen Totilo, Activision CEO Bobby Kotick told employees that he is still confident that the deal will go through “despite a regulatory environment focused on ideology and misconceptions about the tech industry.” Microsoft Vice Chair and President Brad Smith also tweeted that he thinks the deal will “expand competition” and that Microsoft has been committed to “addressing competition concerns” since day one. He also shared Kotick’s sentiments about the deal coming to fruition.

Axios reported earlier that the FTC was planning to block the acquisition. However, the outlet noted that it was “likely” and not guaranteed. Bloomberg also reported that Microsoft was allegedly ready to fight it in court.

Sony has understandably been making quite a commotion about this deal, saying it would have “major negative implications for gamers and the future of the gaming industry.” The PlayStation maker has been citing Call of Duty as an important deciding factor between consoles, stating that many users would look at the colossal shooting franchise as a big reason to switch console allegiances. Microsoft has come out multiple times to assure Sony that Call of Duty would ship to PlayStation systems “as long as there’s a PlayStation out there to ship to.” Sony Interactive Entertainment President and CEO Jim Ryan wasn’t pleased with one of the early offers, calling it “inadequate on many levels.” This was before Smith stated that Microsoft suggested a 10-year deal to keep Call of Duty on PlayStation.

Head of Xbox Phil Spencer tweeted on December 6 that Microsoft entered a 10-year agreement to bring Call of Duty to Nintendo systems and was “committed to helping bring more games to more people – however they choose to play.” He also stated that Microsoft would continue putting the franchise on Steam. The last Call of Duty that was on a Nintendo console was 2013’s tepidly received Call of Duty: Ghosts and the series was only just recently put back on Steam with 2022’s Call of Duty: Modern Warfare II after abstaining from that storefront for the four previous installments. Given Spencer’s tweet, it seems as though Sony did not bite on the same deal.

While Microsoft has tried to assuage fears over the possibility of an exclusive Call of Duty, it has also repeatedly explained that this Activision deal was to have a bigger presence in the mobile space. Activision acquired Candy Crush maker King Digital in 2016 for $5.9 billion, and King’s games have more users than all of Activision’s combined, accounting for more than 240 million of Activision’s 368 million monthly active users for the quarter that wrapped in September 2022. The Activision acquisition would allow the company to better compete with Google and Apple, according to Microsoft.

The FTC is not the only organization looking into this acquisition, as the Competition and Markets Authority in the United Kingdom and the European Commission are both investigating. Saudi Arabia and Brazil, however, have both approved it. A group of four United States senators also sent a letter to the FTC calling on the commission to act, highlighting the misconduct allegations against Activision and a “lack of accountability” for Kotick.