Microsoft and Activision press FTC to approve merger

• The FTC filed a lawsuit two weeks ago to block the deal.

Details: "The acquisition of a single game by the third-place console manufacturer cannot upend a highly competitive industry," Microsoft said in its response.

• "That is particularly so when the manufacturer has made clear it will not withhold the game. The fact that Xbox’s dominant competitor has thus far refused to accept Xbox’s proposal does not justify blocking a transaction that will benefit consumers."
• In its filing, Activision said the FTC was "blinded by ideological skepticism of highvalue technology deals and by complaints from competitors."

What they're saying: "There is no sensible, legitimate reason for our transaction to be prevented from closing," Activision Blizzard CEO Bobby Kotick said in a statement.

• The industry has “enormous competition and few barriers to entry,” he added, noting the proliferation of gaming platforms, availability of free game development tools, and broadening of distribution channels.

The other side: The FTC’s suit early this month warned that a Microsoft acquisition of Activision Blizzard could empower the tech giant to withhold key games, namely Call of Duty, from competitors — or degrade their quality.

• Making top Activision Blizzard franchises exclusive could harm gaming consumers by giving Microsoft an unfair advantage in the console, game subscription and game-streaming markets, the FTC has argued.
• It called Microsoft’s post-acquisition treatment of ZeniMax Studios’ gaming portfolio, which has led to exclusive games that won’t be on rival PlayStation as a “preview” of potential problems.
• “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,” Holly Vedova, the director of the FTC’s bureau of competition, said at the time.

Between the lines: All the parties involved are racing the calendar.

• The FTC case is set to go to trial in the agency’s administrative court on August 2, 2023.
• Microsoft had pledged to acquire Activision by June 30, and its deal to do so expires in July, triggering a break-up fee.
• The FTC’s best option to block the merger before its trial date is to ask a federal court to stop it, though that process could also give Microsoft and Activision a win.

• Regulators in the U.K. and EU who have also been skeptical of the deal and could also block it are expected to release their rulings in the first half of 2023, while Microsoft is trying hard to offer concessions that would get them to back down.

Microsoft is pressing its case against the FTC but continues to also dangle conciliatory options.

• “Even with confidence in our case, we remain committed to creative solutions with regulators that will protect competition, consumers, and workers in the tech sector,” company president Brad Smith said in a statement.
• It has repeatedly pledged to keep Call of Duty on PlayStation and agreed to bring it to Nintendo platforms, but those plans haven’t done the trick yet.

Yes, but Microsoft isn't sticking to playing nice. Its filings also state that hearing the case through the FTC's administrative court, as is currently happening, "violates Article III of the U.S. Constitution and the separation of powers."

Go deeper:

• Group of gamers sues to block Microsoft-Activision deal
• Microsoft loops Nintendo and Valve into push for Activision bid approval

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Editor's note: This article has been updated with details of Activision's filing.