Microsoft-Activision Merger Likely To Face FTC Hurdle

The regulatory oversight might add heat to what the US$69 billion acquisition deal already feels from UK watchdog Competition and Markets Authority.

The Federal Trade Commission is poised to bring an antitrust action to stop Microsoft (Nasdaq: MSFT) US$69 billion merger of video game behemoth Activision Blizzard (NASDAQ: ATVI).

According to people familiar with the matter who spoke with Politico, the FTC staff reviewing the transaction is skeptical of the firms’ claims in addressing the anti-competition issues.

Among the regulatory body’s main concerns is whether Microsoft’s acquisition of Activision would give it an undue advantage in the video game business. Microsoft’s Xbox is ranked third, trailing only Sony Interactive Entertainment and its PlayStation system. Sony, on the other hand, has emerged as the deal’s main opponent, telling the FTC and other regulators that if Microsoft made popular games like Call of Duty exclusive to its platforms, Sony would be greatly disadvantaged.

Call of Duty, World of Warcraft, and Candy Crush are some of the popular Activision titles that Microsoft would get with the acquisition.

Microsoft stated that it has consistently committed to retain Call of Duty on Sony’s PlayStation, and that the game is not the must-have that Sony claims it is. Furthermore, Microsoft points out that the game is not now accessible on any subscription service, and that adding it to the Xbox service in the future would not be detrimental to Sony.

However, the FTC’s worries reportedly extend beyond Call of Duty, as investigators are attempting to determine how Microsoft could utilize future, unannounced titles to boost its gaming business.

The inquiry is still ongoing, but much of it has been finished, including depositions of Microsoft CEO Satya Nadella and Activision head Bobby Kotick, according to people familiar with the matter. However, a lawsuit is not assured, and the FTC’s four commissioners have yet to vote on a complaint or meet with the corporations’ counsel.

The potential FTC hurdle adds to the mounting issues on the merger deal. UK watchdog Competition and Markets Authority (CMA) aired out its concerns in September that Microsoft’s Xbox might use the acquired Activision assets to gain an unfair competitive advantage on the game title releases over its competitors.

“We are concerned that Microsoft could use its control over popular games like Call of Duty and World of Warcraft post-merger to harm rivals, including recent and future rivals in multi-game subscription services and cloud gaming,” said CMA senior director of mergers Sorcha O’Carroll.

For its part, Microsoft said it is “ready to work with the CMA on next steps and address any of its concerns.”

“Sony, as the industry leader, says it is worried about Call of Duty, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation,” said Microsoft president Brad Smith.

The review and probable investigation add to the strides made by the US Justice Department and Federal Trade Commission to look closer into mergers that are deemed anti-competitive.

The tech firms have until July of next year to complete the merger without renegotiating the terms. An administrative action filed later this year or in January is unlikely to be settled by July, and the businesses may be forced to quit the deal.

It was back in January 2022 that Microsoft announced the plan to acquire Activision at US$95 per share.

Microsoft last traded at US$247.58 while Activision last traded at US$76.59 on the Nasdaq.

Information for this briefing was found via Politico and the companies mentioned. The author has no affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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