What’s FTC’s War on the Microsoft-Activision Blizzard Deal Really About

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The wheels on the imminent USD 69 billion Microsoft– Activision Blizzard merger, one of the biggest purchases in video game history may just come to a screeching halt. The US FTC or Federal Trade Commission sued to block the deal in December saying the purchase could “harm competition in multiple dynamic and fast-growing gaming markets.” While the FTC is the biggest barrier between Microsoft and its Call of Duty dreams, it isn’t the only one. The deal must be approved by sixteen governments before it can go through putting Microsoft under an intense regulatory scanner after many years. 

Call of Duty: Mobile, Source: Sensor Tower

War of Duty

The rejuvenated FTC has concerns that appear reasonable on the face of it, and all of these surround the jewel in the Activision Blizzard portfolio, the military-theme first-person shooter game, ‘Call of Duty.’ The game currently available both on Microsoft’s Xbox gaming consoles and competitor Sony’s PlayStation is massively popular. (Last November, Activision Blizzard revealed that the latest version of the game sold more than USD 1 billion worth of copies in ten days becoming the fastest title to touch this milestone in the history of the franchise)

The FTC is essentially worried that Microsoft would restrict ‘Call of Duty’ to their Xbox after acquiring it. The deal would turn Microsoft, an intrinsically computer software company into the third-largest gaming company while giving them the power to also potentially “degrade Activision’s game quality or player experience on rival consoles and gaming services and change the terms and timing of access to Activision’s content.”

A case for Microsoft

Microsoft, on their part, has fought its case with fervour and aggressively pointed at the loose ends in the FTC story. Executives of the company have cited past instances like their popular sandbox game ‘Minecraft,’ which can be played on all major gaming platforms. Their logic is simple – the company stands to lose more if they took ‘Call of Duty’ exclusive than if they kept it open to all. 

Lulu Cheng Meservey, the chief communications officer with Activision made a case for the deal on Twitter saying, “Taking Call of Duty exclusive would be a disaster for Xbox. By withholding ‘Call of Duty’ from other platforms, Xbox would torch trust, alienate gamers, and erode much of the value of COD. And they’d lose billions of dollars,” she said. 

Meservey continued that the FTC was fighting the war for Sony and ignoring facts which were these – Microsoft has offered Sony a 10-year contract to release every version of ‘Call of Duty’ on PlayStation at the same time as Xbox already in December. The Satya Nadella-led company has also reached a 10-year agreement with Nintendo for their distribution service Steam

Gaming revenue generated by Microsoft between 2017-2022 in millions of dollars, Source: Statista

She also denied the FTC’s accusations that Microsoft had broken promises in the past. In March last year, Microsoft finalised its purchase of game developer Bethesda’s parent company, ZeniMax Media for USD 7.5 billion. Microsoft had then come out and said that there will be select upcoming games that “will be exclusive to Xbox and PC” after the deal had been signed on by the European Commission and the US FTC. 

In its latest filing, the FTC stated, “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 has no incentive to withhold games from rival consoles.” 

In a retort to FTC’s claims Microsoft and the EU later said that there was no such promise that was neither made nor broken. A representative from the EU agency said, “The Commission cleared the Microsoft/ZeniMax transaction unconditionally as it concluded that the transaction would not raise competition concerns,” effectively calling out the FTC. 

FTC chair and Big Tech critic, Lina Khan, Source: Reuters

A more feisty FTC

The FTC itself has also gone under a marked change since antitrust pioneer Lina Khan was appointed as the chairperson in June last year. According to experts, plenty of Big Tech deals flew under the radar within the past decade and the FTC appears to be making up for lost time now. 

While Microsoft has feigned ignorance around what even makes ‘Call of Duty’ special (It is evident that the game makes tons of money), FTC has definitely taken a sharp turn towards setting a harsher precedent. 

In July, the FTC sued Meta and blocked its acquisition of virtual reality startup Within. The deal, significant to Meta’s development of its metaverse signalled that the FTC was now looking at using antitrust laws even before the maturation of a market. The FTC had then justified their actions saying Meta’s deal would go on to remove competition in a nascent VR market. 

In October, Meta was forced to sell search engine and online database, Giphy which they bought two years back for USD 315 million. For a deal value as low as this to get revoked would mean that deals that would have gone through easily just sometime back are more likely to get cast off now. But does more teeth simply mean that antitrust laws should bite?