Politico is reporting that, “according to three people with knowledge of the matter,” the Federal Trade Commission is “likely to file an antitrust lawsuit to block Microsoft’s $69 billion takeover of video game giant Activision Blizzard.”
The FTC, emboldened by their recent success in stopping the merger of book publishers Penguin Random House and Simon & Schuster, have made no official announcement yet, and the Politico report says “a lawsuit challenging the deal is not guaranteed.”
Steps are, however, being made to prepare one, with “much of the heavy lifting” having already been done, like receiving depositions from the bosses of Microsoft (Satya Nadella) and Activision Blizzard (Bobby Kotick). Because of this, it’s said that “if the agency does move ahead with a case, it could come as soon as next month.”
Any antitrust case would have a fairly clear goal: the FTC would be arguing that allowing a major platform holder to purchase Activision Blizzard, one of the world’s biggest third-party publishers, would give Microsoft an unfair advantage in the marketplace.
That argument, and process, is already underway in Europe. Earlier this month, the European Union “opened a full-scale investigation” into the proposed deal, saying in a statement:
The Commission’s preliminary investigation shows that the transaction may significantly reduce competition on the markets for the distribution of console and PC video games, including multigame subscription services and/or cloud game streaming services, and for PC operating systems.
The preliminary investigation suggests that Microsoft may have the ability, as well as a potential economic incentive, to engage in foreclosure strategies vis-à-vis Microsoft’s rival distributors of console video games.
In the United Kingdom, meanwhile, the Competition and Markets Authority is also investigating the deal, saying the merger “may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”
Interestingly, the Politico report also mentions Google as a “lesser” opponent of the merger, saying, “The company has argued that Microsoft has purposely degraded the quality of its Game Pass subscription service when used with Google’s Chrome operating system, and owning Activision would further its incentive to do so, ultimately steering hardware sales towards Microsoft and away from Google.”
UPDATE 10:00pm ET: An Activision spokesperson tells Kotaku:
Any suggestion that the transaction could lead to anticompetitive effects is completely absurd. This merger will benefit gamers and the U.S. gaming industry, especially as we face increasingly stiff competition from abroad. We are committed to continuing to work cooperatively with regulators around the globe to allow the transaction to proceed, but won’t hesitate to fight to defend the transaction if required.
UPDATE 8:00pm ET, November 28: A Microsoft spokesperson tells Kotaku:
As we have said before, we are prepared to address the concerns of regulators, including the FTC, and Sony to ensure the deal closes with confidence. We’ll still trail Sony and Tencent in the market after the deal closes, and together Activision and Xbox will benefit gamers and developers and make the industry more competitive.