Jan 5, 2023 - Technology

Exclusive: Microsoft, Activision back off aggressive claim in FTC case

Photo of the Microsoft logo outside of the company's corporate headquarters

Photo: Toby Scott/SOPA Images/LightRocket via Getty Images

Microsoft says it made a mistake last month when it claimed that the very structure of Federal Trade Commission, the agency trying to block its bid for Activision Blizzard, violates the United States Constitution.

Driving the news: Microsoft removed that argument Thursday as it filed a revised — and less incendiary — response to the FTC's lawsuit to stop the tech giant’s $69 billion gaming acquisition.

  • Microsoft's new filing still argues that its purchase of the creator of Call of Duty, World of Warcraft and Candy Crush would not unfairly stifle competition with other game makers.
  • But it no longer includes a five-bullet-point salvo claiming that the FTC’s structure and in-house administrative court, where the Activision case is being heard, run afoul of the Constitution, the separation of powers and the due process clause of the 5th Amendment.

What they’re saying: “The FTC has an important mission to protect competition and consumers, and we quickly updated our response to omit language suggesting otherwise based on the constitution,” Microsoft public affairs spokesperson David Cuddy tells Axios.

  • “We initially put all potential arguments on the table internally and should have dropped these defenses before we filed.
  • “We appreciated feedback about these defenses and are engaging directly with those who expressed concerns to make our position clear.”

Activision is also dropping those same allegations, which it had included in its response to the lawsuit last month.

  • The Supreme Court heard arguments in November in a separate case regarding whether the FTC's current structure and in-house administrative court violates the constitution. No ruling has been issued yet.

Thought bubble from Axios' chief tech correspondent, Ina Fried: While Microsoft was known for its combative stance in the earliest days of its antitrust woes under former general counsel Bill Neukom, the challenge to the FTC's authority contrasts sharply with the far more collaborative approach it has taken for the past two decades under the leadership of Brad Smith.

  • That has included settling disputes with rivals, collaborating with governments and, where possible, reaching agreements with regulators rather than battling it out.

What’s next: The FTC case is scheduled to stretch out far into 2023, with a trial set to commence in August, a month after Microsoft’s offer for Activision Blizzard expires.

  • Microsoft and Activision Blizzard are both hoping to clear regulatory hurdles before then.
  • Microsoft has repeatedly offered to have extensive talks with the FTC over possible concessions that would resolve the agency’s concerns.

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