Microsoft is ready to fight for its $69 billion Activision deal

Microsoft Corp. is getting ready for its $69 billion acquisition of gaming company Activision Blizzard Inc.

The Xbox maker has not had discussions with the FTC about remedies or concessions to get the deal approved, said the person, who asked not to be identified over a confidential matter. FTC staff is concluding its investigation and is expected to make a recommendation soon, the person added. The FTC commissioners would then vote on whether to file a case.

In case the FTC tries to block the case, Microsoft plans to challenge that decision in court, said the person, who asked not to be identified and was talking about internal strategy. Bloomberg Intelligence antitrust analyst Jennifer Rie said she would not be surprised if the FTC filed a lawsuit to block the deal, but noted that a court battle would be difficult for enforcers to win and Microsoft could prevail — although a legal battle beyond that could end date of the deal. Microsoft said it expects to close the transaction by June 30.

Microsoft’s other option would be to abandon the deal in the face of an FTC challenge. That’s what the company did in 1995 when it sued the US government over its acquisition of accounting software maker Intuit Inc.

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Microsoft’s best chance to win approval to buy Activision is to convince the Biden administration to accept a settlement in which it pledges not to withhold its popular titles from rivals.

But Biden’s antitrust enforcers aren’t fond of such deals — especially after this month’s Ticketmaster blowup put the spotlight back on a failed 2010 Justice Department settlement with Live Nation Entertainment Inc.

The FTC takes an aggressive approach to mergers, especially when it comes to technology and digital markets, but has not indicated whether it plans to sue to block the deal.

In July, the agency sued Meta Platforms Inc. to block to buy virtual reality fitness app Within, claims that the transaction could eliminate competition in some market, referred to as “nascent competition”.

Microsoft and the FTC declined to comment. Politico reported last week that the FTC is likely to challenge the deal.

The United States is one of at least three jurisdictions where regulators are raising questions about the blockbuster transaction, which will dramatically change the video game landscape and propel Microsoft to No. 3 in the global gaming market behind Tencent Holdings Ltd. and Sony Group Corp. .

European and British antitrust bodies have raised the question of whether the popular Call of Duty game franchise will remain available to gamers on the Sony PlayStation console and whether the merger will allow Microsoft to assume a dominant role in the growing but still small market for cloud gaming services.

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Microsoft has offered Sony a deal in which it will make Call of Duty games available on the PlayStation for a decade, though the companies must work out financial terms for that deal, the person said.

The software giant has advised the regulators of those discussions, but has not formally proposed a remedy because the review process has not progressed to that stage, the person said.

It does not make financial or strategic sense for Microsoft to keep the best-selling game franchise from PlayStation, because more copies of the games are sold on PlayStation than Xbox and because such a move would anger the players in a way that could have negative effects for Microsoft. In fact, the acquisition wouldn’t be financially viable for Microsoft if it were to cut Call of Duty to PlayStation, the person said.

Due to the different stages of the various probes around the world, Microsoft will probably discuss this step first with the European Commission, which set a March 23 to complete its in-depth review of the deal.

Microsoft hopes the remedies it offers the EU will suffice worldwide, the person said. It is possible that UK regulators will want additional steps from the company, however.

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The UK Competition and Markets Authority is currently in the midst of an in-depth investigation into the deal after an initial investigation found concerns in the game console, multi-game subscription services and cloud gaming markets.

The watchdog said in an October document outlining the scope of its investigation that it is concerned the transaction could allow Microsoft to gain outsized market power that would allow it to undercut competitors such as Sony. Although Microsoft promised it would not do this because of reputational damage to the Xbox or Call of Duty, the watchdog said that it had not identified “convincing evidence” to believe these statements.

The investigation into the dominance of the big tech companies has been lifted by the UK agency since it was given new powers after Brexit.

Microsoft and the CMA will both appear at a main party hearing in mid-December, part of the UK merger process, which will allow them to examine and test the parties’ arguments. An interim decision from the agency is expected by January and the deadline for the full decision is March.



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