The Federal Trade Commission (FTC) is intensifying its opposition to Microsoft’s acquisition of video-game company Activision Blizzard by filing a motion to block the merger in a federal district court. The plan for Microsoft to purchase the maker of popular video games such as Call of Duty, World of Warcraft, and Candy Crush was announced over a year ago, and now the FTC is asking for a temporary restraining order and injunction to stop the deal from closing before the case is adjudicated in the agency’s in-house administrative court.
Microsoft hopes to gain a foothold in mobile video games by purchasing Activision and its popular titles. The video-game industry now earns more than the movie and music industries combined. Mobile gaming is the largest and fastest-growing segment of the broader video-game market, with $92 billion of revenue in 2022.
However, the FTC is concerned that the world’s fourth-largest tech company will not allow competitors, such as Sony or Nintendo, to offer Activision’s popular games. The FTC wrote in a press release at the beginning of its opposition to the deal that the acquisition “would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.”
Microsoft has already offered to remedy those FTC concerns by pledging to offer Call of Duty on Sony devices for ten years, possibly much longer than the game will remain a top pick among users. Sony called the offer “inadequate” and continues to lobby regulators in the US and around the world to block the sale.
Microsoft points out that it has every financial incentive to offer Activision’s games to users of competitors’ consoles because two-thirds of Call of Duty’s players are on Sony’s PlayStation. Losing the revenue from those players’ in-game purchases would be a significant loss.
The Activision deal would be a vertical merger, as their products would be folded into Microsoft’s video-game supply chain. Those types of deals have long been recognized by US antitrust authorities as producing efficiencies that benefit consumers. Even the regulatory zealots of the European Union have cleared the deal to go forward.
One reason the FTC may be pursuing this case is that FTC leadership is determined to expand the scope and activity of competition law in the US, no matter how many failures in court that brings. This is an ideological war on “bigness” and the consumer-welfare standard, with roots stretching back to the progressive dogma of the early 20th century.
The FTC may be thwarting the rise of a useful rival to Apple and Google’s dominance of mobile gaming. Surely the FTC has better things to do than prevent healthy competition.
