Microsoft and Activision have said the deal will close by June 30, the end of Microsoft’s current fiscal year. The FTC would need to separately sue in federal court if it wants Microsoft to put off closing the deal until after the trial is over.
“With control of Activision’s content, Microsoft would have 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,” the agency said in its complaint. “This loss of competition would likely result in significant harm to consumers in multiple markets at a pivotal time for the industry.”
In its release announcing the lawsuit, the FTC cited Microsoft’s decision to make two upcoming titles by newly acquired unit Bethesda Softworks exclusive to Microsoft’s platforms despite assurances the company gave to EU regulators that it had no incentive to withhold games from rival consoles.
The lawsuit is part of an effort by FTC Chair Lina Khan to more aggressively police mergers, particularly those by the biggest tech platforms. Since President Joe Biden appointed her to helm the agency in June 2021, it has killed mergers between Lockheed Martin Corp. and Aerojet Rocketdyne Holdings Inc. as well as Nvidia Corp.’s bid to buy SoftBank Group Corp.’s Arm. The FTC heads to federal court Thursday in San Jose, California, in an effort to block Meta Platforms Inc. from buying a virtual reality startup.
Although Brazilian antitrust officials cleared the Microsoft-Activision deal in October, other competition regulators, including the UK and the European Union, have also raised concerns. Those two bodies aren’t set to issue decisions on the deal until next year.
Microsoft on Tuesday announced a deal to bring Call of Duty to the Steam PC gaming platform and Nintendo Co. consoles. The company said it’s also offered a proposal that would keep Call of Duty on Sony’s PlayStation for the next 10 years, but the Japanese electronics giant has so far rebuffed efforts to work out a resolution.
Joost van Dreunen, a video games expert who teaches at New York University’s Stern School of Business, said antitrust authorities have become skeptical of pledges, particularly by the tech platforms, about future behavior. Van Dreunen provided comments on the deal to UK competition officials.
“I don’t think it’s ultimately enough for the FTC to go on,” van Dreunen said of Microsoft’s pledge.
The Redmond, Washington, tech giant sought to placate possible labor concerns about the merger by reaching an agreement with the Communications Workers of America, which also represents employees in the gaming industry. In the pact, Microsoft pledged to take a neutral approach if employees express interest in joining a union.
The company also said it would stop using noncompete or confidentiality clauses to bar workers from talking about discrimination or harassment as part of a settlement or separation deal.
The FTC has publicly raised concerns about the use of noncompetes and the impact of mergers on labor conditions.
The agency’s in-house proceedings, overseen by Administrative Law Judge D. Michael Chappell, generally take several months to a year to resolve.