US authority sues against the takeover of Activision Blizzard by Microsoft – Because they allegedly lied about Bethesda [Update]

The U.S. antitrust authority “Federal Trade Commission” (FTC) has concerns regarding Microsoft’s acquisition of Activision Blizzard. Specifically, there are fears that Microsoft could withhold content from other platforms – just as they do with Bethesda.

Microsoft announced the largest gaming deal in history in early 2022: They want to completely acquire the company Activision Blizzard, offering around 69 billion USD for it.

The U.S. company Microsoft would then become number 3 in the gaming market – behind the Japanese competitor Sony and the Chinese gaming giant Tencent.

However, it quickly became clear that antitrust authorities want to examine the deal. It concerns whether Microsoft would hold too much market power post-acquisition, which could harm consumers. For example, by preventing certain content from appearing on other consoles or by offering it in lower quality.

Especially the authorities of the EU, UK, and the USA are thoroughly investigating the deal, and the U.S. authority FTC has now decided to file an administrative complaint, a type of lawsuit (via ftc.gov).

Microsoft must contend with this lawsuit and formally refute the FTC’s allegations in a hearing before a judge. Otherwise, the FTC could file another lawsuit in federal court to delay or even completely prevent the deal.

The Bethesda deal of 2021 is part of the evidence.

What does the U.S. authority say? Some parties involved in the proceedings have already spoken out. Foremost is Holly Vedova, Director of the Bureau of Competition of the FTC. She said: “Today we are attempting to prevent Microsoft from gaining control over a leading independent game studio and using it to harm competition in several dynamic and fast-growing gaming markets.”

It is not just about the gaming market. The deal also concerns subscription services (Xbox Game Pass) as well as state-of-the-art cloud-based streaming services for video games. These markets are just starting to emerge, and the aim is to prevent Microsoft from exerting too much market power that could harm this process.

Furthermore, it was pointed out that Microsoft has previously aimed to withhold game content from its competitors.

Although during the acquisition of ZeniMax, the parent company of Bethesda Softworks, assurances were given to European authorities that they had no incentives to withhold games from competing consoles, this is exactly what is happening in the case of Starfield and the co-op shooter Redfall. According to the FTC report, this was a lie. However, the European Commission states something different in a statement (via wccftech.com).

Holly Vedova said: “Microsoft has already shown that it can and will withhold content from its gaming competitors.”

What does Microsoft say? Brad Smith, Vice Chairman and President of Microsoft, commented on Twitter with the following initial statement:

Tweet translation: “We continue to believe that our deal to acquire Activision Blizzard will expand competition and create more opportunities for players and game developers.”

“We have been committed to addressing competitive concerns since day one, including by offering concessions to the FTC earlier this week. While we believe in giving peace a chance, we have full confidence in our case and welcome the opportunity to present it in court.”

What does Activision Blizzard say? CEO Bobby Kotick expressed himself in a letter to Activision Blizzard employees, which was shared with businesswire.com (via businesswire.com).

He contextualizes the FTC’s decision in the letter, stating: “The claim that this deal is anti-competitive does not align with the facts, and we believe that we will win this challenge.”

Here too, there is clear optimism that the deal will still go through despite the FTC’s complaint.

Will the deal fall through? The FTC’s complaint and potential lawsuit regarding the acquisition is a hurdle for the merger, but it does not necessarily mean that the plans are canceled.

Both parties – Microsoft and Activision Blizzard – want the deal and will likely make further concessions to the authorities if necessary.

The markets continue to believe in the deal. Activision Blizzard’s stock lost only minimal value after the announcement, while Microsoft even rose (via finance.yahoo.com). This is an indication that many investors still believe in the acquisition.

However, the intended timeline for the acquisition will remain an exciting topic. The merger is supposed to be completed by June 2023. However, negotiations with the FTC might take longer. The deal may then need to be renegotiated.