Dec 9, 2022 - Technology

Microsoft's new antitrust nightmare

Illustration of pixelated justice scales with Microsoft logo on one side.

Illustration: Megan Robinson/Axios

The Federal Trade Commission's suit to block Microsoft's $69 billion acquisition of Activision Blizzard marks the U.S. government's biggest tech-antitrust move in years.

Yes, but: It's happening on a very different sector of the Big Tech power map than most observers expected when the techlash began five years ago.

  • At that era's start, an unprecedented accumulation of money and power in a handful of giant tech companies, along with rising concerns over data privacy, misinformation and user harms, led a wave of tech critics to demand government action.
  • Calls rose to "break up" Facebook and Google. Plenty of people were angry with Apple and Amazon, too. Lawsuits and investigations followed. But Microsoft largely escaped the techlash's bite.

Flashback: The venerable software giant already fought a bitter antitrust war with the Department of Justice that started 25 years ago. Since then, it has largely gotten along with U.S. regulators.

Now, though, it's Microsoft that's squarely in the government's sights.

  • The FTC and its chair, Lina Khan, want to break new ground in U.S. antitrust law and shake up the oligarchic tech industry — and once again, the feds are casting Microsoft as competition's enemy.

Microsoft control of Activision and its gaming library, the FTC suit says, would give it "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."

Details: While a lot of attention has been paid to what Microsoft might do with Activision's lucrative Call of Duty franchise, the FTC's complaint zeroed in on Microsoft's practices regarding games made by Bethesda/ZeniMax, which Microsoft bought for $7.5 billion in 2020.

  • "Microsoft decided to make several of Bethesda's titles, including Starfield and Redfall, Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles," the FTC said in its statement.

Between the lines: The commission voted 3-1, with Republican commissioner Christine Wilson voting no, to file an administrative complaint seeking to block the merger.

  • The agency is not seeking a preliminary injunction to stop the deal from closing, likely because an ongoing investigation by the European Commission's already prevents that. Regulators in the EU or the U.K. could move to block the deal if they don't come to an agreement with Microsoft over concessions.

What they're saying: "We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers. We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC," Microsoft president Brad Smith said in a statement.

  • "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," Smith said.

The big picture: The FTC is also in the midst of a trial in its effort to block Meta's acquisition of tiny VR game studio Within.

Our thought bubble: Big deal, small deal — the government is putting tech's giants on notice to expect legal challenges over just about any acquisition they might try.

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