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posted by janrinok on Sunday December 11 2022, @10:34PM   Printer-friendly
from the not-blizzard-anymore dept.

The Federal Trade Commission has announced that it intends to sue to block Microsoft from acquiring Activision. Regulators are making the argument that Microsoft is doing this to use its control of game catalogs to make more and more games exclusive to the XBox in an effort to gain market share from its competitors, which is a violation of anti-trust law.

In a complaint issued today, the FTC pointed to Microsoft's record of acquiring and using valuable gaming content to suppress competition from rival consoles, including its acquisition of ZeniMax, parent company of Bethesda Softworks (a well-known game developer). 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 had no incentive to withhold games from rival consoles.

"Microsoft has already shown that it can and will withhold content from its gaming rivals," said Holly Vedova, Director of the FTC's Bureau of Competition. "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."

Microsoft's Xbox Series S and Series X are one of only two types of high performance video game consoles. Importantly, Microsoft also offers a leading video game content subscription service called Xbox Game Pass, as well as a cutting-edge cloud-based video game streaming service, according to the complaint.

Activision is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices, including video game consoles, PCs, and mobile devices. It produces some of the most iconic and popular video game titles, including Call of Duty, World of Warcraft, Diablo, and Overwatch, and has millions of monthly active users around the world, according to the FTC's complaint. Activision currently has a strategy of offering its games on many devices regardless of producer.

But that could change if the deal is allowed to proceed. With control over Activision's blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision's pricing, degrading Activision's game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision's content, or withholding content from competitors entirely, resulting in harm to consumers.

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UK Government Blocks Microsoft's Proposed Activision Purchase 12 comments

UK government blocks Microsoft's proposed Activision purchase

In its long-awaited final report, the United Kingdom's Competition and Markets Authority said that Microsoft's proposed $69 billion acquisition of Activision would "result in a substantial lessening of competition" (SLC) in the supply of cloud-gaming services in the UK. As such, the regulator said that "the only effective remedy to this SLC and its adverse consequences is to prohibit the Merger."

The final report cites Microsoft's "strong position" in the cloud-gaming sector, where the company has an estimated 60 to 70 percent market share that makes it "already much stronger than its rivals." After purchasing Activision, the CMA says Microsoft "would find it commercially beneficial to make Activision's titles exclusive to its own cloud gaming service."

Microsoft has in recent months signed deals with Nvidia and smaller cloud-gaming providers in an attempt to "mak[e] even more clear to regulators that our acquisition of Activision Blizzard will make Call of Duty available on far more devices than before," as Microsoft Vice Chair and President Brad Smith said in a statement last month. But the CMA said these kinds of cloud-gaming deals—which Microsoft submitted to the CMA as a proposed remedy for any anticompetitive effects of the merger—were "limited to cloud gaming providers with specific business models" and thus not sufficient to address the regulator's concerns.

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For months now, Microsoft has sworn up and down that it has no interest in making Call of Duty exclusive to the Xbox if and when its proposed $69 billion Activision acquisition is approved. But as the FTC's request for an injunction stopping that acquisition heads toward opening arguments this week, the federal regulator cites one piece of what it calls "powerful evidence" that it can't trust Microsoft's assurances. In short, as the FTC puts it, "Microsoft's actions following its 2021 acquisition of ZeniMax speak louder than Defendants' words."
Rather than focusing on what it calls a "strained analogy" to ZeniMax, Microsoft would prefer the court look at Microsoft's purchase of Minecraft-maker Mojang, which has continued to publish the game on a variety of platforms after becoming part of Microsoft. This is a better analogy for Call of Duty, Microsoft writes, because Minecraft was similarly "an existing, multi-player, cross-platform franchise like COD."
Call of Duty is unlike Minecraft, the FTC argues, in part because Minecraft is available in largely the same form on mobile phones, tablets, and the Switch. "Even if Microsoft took Minecraft off of rival consoles and subscription and cloud gaming services, it would still be available for play on many other devices. The context for Call of Duty is very different."

Regardless, the FTC also argues that this manufactured categorization doesn't matter, because Microsoft's exclusivity decision applied to "all future ZeniMax games." While Microsoft said in 2021 that "some" future Bethesda games would be Xbox exclusives, no Bethesda non-exclusives have been announced since then.

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  • (Score: 3, Informative) by Gaaark on Monday December 12 2022, @12:03AM (2 children)

    by Gaaark (41) on Monday December 12 2022, @12:03AM (#1282067) Journal

    Should have stopped them at Minecraft.

    Really, should have stopped them at their formation.

    --- Please remind me if I haven't been civil to you: I'm channeling MDC. ---Gaaark 2.0 ---
    • (Score: -1, Troll) by Anonymous Coward on Monday December 12 2022, @03:11AM

      by Anonymous Coward on Monday December 12 2022, @03:11AM (#1282084)

      Hey look, the peasant doesn't like Microsoft!

    • (Score: 4, Informative) by Thexalon on Monday December 12 2022, @12:07PM

      by Thexalon (636) on Monday December 12 2022, @12:07PM (#1282117)

      When Microsoft consisted of BillG, Paul Allen, Steve Ballmer, and maybe a couple of other people, and were a no-name company in Albuquerque selling a version of Basic and living very much on BillG's family money, there wasn't a problem. The problem was the exclusive licensing terms they demanded from their customers for DOS and later Windows which made it impossible for companies who sold one Microsoft-infected machine to sell non-Microsoft-infected machines, and should have been treated as illegal under antitrust laws but weren't because regulators didn't understand that "with a computer" didn't change all that much about how economics work.

      At the very least, the 1990's antitrust case against them should have involved splitting the OS division from everything else. Microsoft reacted the verdict with the conclusion that they needed to invest a lot more in political campaigns, did so, and suddenly not only did the penalties the feds sought get changed from "split up Microsoft" to "they have to promise not to do it again", but when they did it again absolutely nothing happened. And this was not affected in any way by which parties controlled chambers of Congress or the White House. Read into that whatever you like.

      The only thing that stops a bad guy with a compiler is a good guy with a compiler.
  • (Score: 2) by Dale on Monday December 12 2022, @02:37PM

    by Dale (539) on Monday December 12 2022, @02:37PM (#1282131)

    I'm not sure how the FTC can win this one. As much as I believe this merger is a bad idea, I fail to see how they are going to be successful in stopping it. There are countless companies publishing games. The barriers to entry into the market simply are not great. Single person and small shops can and do publish games that are wildly successful. There simply isn't a single or trio of companies that control the market here like there are in other markets. The best the FTC is going to get out of this is some minor, time-limited concession that is a coin toss that Microsoft will actually abide by.

    Again, this is not a great idea. It certainly is not good for consumers. It absolutely harms competition. I simply don't see how the FTC can find a path to actually block it and the concessions they might end up getting are pretty immaterial.