Microsoft’s Letter to the FTC: Why the 68.7 billion acquisition should go through and why it doesn’t want to make any popular games exclusive
Microsoft filed a response to the Federal Trade Commission, which was trying to block the company’s acquisition. In the 37-page document, which you can read in full below, Microsoft argues its case for why its $68.7 billion acquisition should go through — it also defends its acquisition of Bethesda owner ZeniMax, while admitting that it’s planning to make three future titles from the company exclusive to Xbox and PC.
The FTC pointed to Microsoft’s previous acquisitions of game developers including Bethesda Softworks and its parent company ZeniMax as proof that it was not planning to make some popular game titles exclusive.
In an email to employees, Bobby Kotick said he was confident the deal would close despite the FTC suit. He said that the allegation that the deal is anti-competitive does not align with the facts.
The Microsoft deal is also facing scrutiny outside the United States, with the European Union saying it would decide by March 23, 2023, whether to clear or block the deal.
Officials in the United Kingdom and the European Union have also scrutinized the deal as potentially anticompetitive. The FTC is the first agency to try and block the deal completely.
Bringing Call of Duty to the FTC: Why Microsoft is So Hard About It? An Attorney General’s Report on “Getting The Facts: How Microsoft is Committed to Growing Games”
One year ago this month, Microsoft announced it would spend $68.7 billion to acquire Activision Blizzard, highlighting how it would get “iconic franchises” including Call of Duty, Warcraft and Candy Crush for that fee. But now that gamers and regulators are worrying Microsoft might keep Call of Duty from appearing on Sony’s PlayStation, Microsoft’s lawyers are suddenly pretending they have no idea why Call of Duty is special.
The company’s corporate vice president of communications, Frank X. Shaw, also tweeted a link to a document titled: “Get The Facts: How Microsoft is Committed to Growing Gaming Communities.”
Microsoft accused Sony of paying developers to stop their work from being seen on the Xbox Game Pass service, while Sony argued that the acquisition by Microsoft could hurt developers and lead to price rises.
Three of the FTC’s seven commissioners voted in favor of the complaint being issued, while the lone Republican voted against it. Another Republican left the panel earlier this year.
Smith said that they have complete confidence in their case and are looking forward to presenting it in court.
The FTC’s challenge — which is being filed in an administrative court — could be a test case for President Joe Biden’s mandate to scrutinize big tech mergers.
William Kovacic, former chair of the FTC, said that the antitrust regulators under Biden have staked out the view that the policy for decades has been too weak.
The goal is to not allow deals that are bad and not accept weak settlements, as was the case under George W. Bush. But he said trying to block this acquisition could trigger a legal challenge from Microsoft that the company has a good chance of winning.
“It’s evident that the company has been making a number of concessions,” he said. “If the FTC turns down Microsoft’s commitments, Microsoft would likely raise them in court and say the FTC is being incorrigibly stubborn about this.”
The FTC was concerned that the popular games, including “World of Warcraft” and “Diablo”, could be stopped from being offered on devices that rival Microsoft’s Xbox. It set a hearing before an administrative law judge for August 2023.
When Epic v. Apple came to the First Closing of the Penguin Random House / Simon & Schuster Acquisitions, Microsoft Discerned a Giant Battle Against Apple
The Biden administration has made antitrust enforcement a priority. The US Department of Justice recently stopped a $2.2 billion merger of Penguin Random House, the world’s largest book publisher, and smaller US rival Simon & Schuster.
Microsoft confirmed Starfield will be an exclusive to its platforms, and it was also announced that The Elder Scrolls VI will only be on its platforms.
There is no sensible, legitimate reason for our transaction to be prevented from closing. There are no barriers to entry in our industry. We have seen a range of devices that allow players to play games in a variety of ways. Engines and tools are freely available to developers large and small. The breadth of distribution options for games has never been more widespread. The merits of the case are what we believe will prevail.
We remain committed to finding solutions that protect competition, consumers and workers in the tech sector even though we don’t have much confidence in our case. The door always remains open to find an agreement that can benefit everyone, as has been learned from our lawsuits in the past.
For one thing, Activision Blizzard probably coughed up those details as part of the due diligence around the transaction before Microsoft ever announced it would spend $68 billion on the company. If that didn’t happen, I suppose Microsoft has lots of opposition research. When I brought you the very best and most revealing emails from the Epic v. Apple trial, I came across a 67-page document from Microsoft’s “Gaming Business Planning & Strategy Team” that broke down all of Microsoft’s main competitors in quite a number of ways, going so far as to estimate non-public information like how Sony’s PlayStation Now cloud gaming service was pulling in $359 million in 2019.