from the consequences dept
Actions, as they say, have consequences. Or potential consequences, at least, in the case of Microsoft battling with the FTC. In the ongoing drama that is Microsoft’s attempted purchase of Activision, the FTC filed for a temporary restraining order barring the consummation of the purchase while its lawsuit remains unresolved. The first trial date in the case is upcoming and Microsoft filed an opposition to the preliminary injunction barring the deal, arguing against all manner of items in the FTC’s suit. I will embed the FTC’s response below so you can read the entire thing, but the regulator is explicit in eviscerating Microsoft’s motion. A sample from the opening includes:
Defendants’ arguments might be persuasive if they were aimed at the applicable law, the FTC’s actual claims, and the record of evidence. They are not. Defendants assert that the upcoming hearing must decide the merits of their deal, lest they be forced to renegotiate their self-imposed July 18 deadline for completing the transaction. but the law, as this Court already ruled, is that the FTC need only present “evidence sufficient to raise serious, substantial, difficult questions regarding the anticompetitive effects” of Microsoft’s acquisition of Activision. Defendants assert that the “FTC’s central claim is that the combined firm would withhold certain Activision content — in particular COD — from Sony.” But that is a strawman. The FTC’s actual claim is that it is reasonably probable that the combined firm will have the ability and incentive to harm competition, including from future competitors, in several ways in multiple markets where competitive effects of this transaction will be felt, including consoles, content subscription, and cloud gaming services.
Portions of the filing are redacted, but it goes on like that. You really should read the thing for yourself below.
But the most interesting portion of the filing to me was that the FTC has adopted the same point that I and others have made regarding Microsoft’s promises that it totally isn’t going to make Activision titles exclusive to Microsoft systems. Which is, essentially: you guys said the same thing when you acquired Zenimax.
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.”
“Defendants put great stock in Microsoft’s concerns about ‘infuriating gamers’ if it were to foreclose rivals’ access to Activision content,” the FTC writes. “But those same concerns did not stop the ZeniMax decision.”
And the FTC is right. As we talked about at the time, Microsoft did a full flip-flop once it acquired Zenimax. The company made a great deal of noise about how it didn’t believe that exclusivity was the future of its gaming products, only to turn Starfield and the latest Elder Scrolls titles into Microsoft exclusives. It’s as pure and apropos example of the company saying one thing and doing another as the FTC could have hoped to cite.
Meanwhile, Microsoft argued that the Call of Duty franchise was more akin to how it handled its purchase of Minecraft by building in more hyphenated adjectives than a Tim Cushing Techdift article.
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.”
In the FTC’s view, though, Microsoft has simply “concoct[ed] their own category of a ‘popular franchise with substantial cross-platform play’ to shoehorn Minecraft and Call of Duty together.” The FTC also throws some slight shade at the “multi-hyphenated description (‘existing, multi-player, cross-platform’) [Microsoft] need[s] to append to Call of Duty to make their point,” citing this as “the surest sign of defendants’ struggle to distinguish Activision’s content from ZeniMax’s.”
It goes on to point out that the analogy doesn’t work because Minecraft is already available on a ton of other platforms as an existing game, compared with the COD franchise, which is an ongoing series of titles. It was, frankly, a weak analogy.
None of this is to say that the FTC has a slam-dunk case here, of course, but it sure doesn’t seem to be going well for Microsoft thus far.
Filed Under: antitrust, competition, ftc, starfield
Companies: activision blizzard, microsoft, zenimax
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