The Federal Trade Commission filed an antitrust lawsuit against Microsoft (MSFT) on Thursday in an attempt to block Microsoft’s $69 billion acquisition of “Call of Duty” publisher Activision Blizzard (ATVI).
The suit comes as regulators with the U.K.’s Competition and Markets Authority and the European Commission continue to evaluate the deal. Rival PlayStation maker Sony (SONY) has been lobbying regulators around the world in an attempt to curtail Microsoft’s plans.
In a press release, the FTC asserted that the deal "would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business."
The agency went on to accuse Microsoft of backtracking on assurances given to European Union antitrust regulators when in 2021 Microsoft acquired gaming content developed by Bethesda Softworks. Despite the assurances, Microsoft made some of Bethesda's games exclusive to its gaming ecosystem, the FTC said. The agency also expressed concerns that Microsoft is one of only two high-performance console makers.
The deal, which Microsoft announced in Jan. 2022, would make the tech giant the third-largest gaming company in the world by revenue behind Tencent and Sony. Microsoft claims that the move will help it compete in the mobile gaming space — thanks to Activision Blizzard’s King business — and continue to build out its Xbox Cloud Gaming service.
Xbox Cloud Gaming allows users to stream and play video games from Microsoft’s servers to less strongly powered devices like their smartphones, laptops, Chromebooks, and even smart TVs without the need for a pricey console or PC. According to Microsoft CEO Satya Nadella, more than 20 million people had streamed games via Xbox Cloud Gaming as of Oct. 2022. That’s an increase from just 10 million in April 2022.
According to market rival Sony, if Microsoft is permitted to purchase Activision Blizzard the combined company would be able to make “Call of Duty” an Xbox or PC exclusive. That would cut Sony off from the game series entirely. And while Activision Blizzard owns other game franchises including “Diablo” and “World of Warcraft,” “Call of Duty” is its crown jewel.
Sales of the latest edition of “Call of Duty,” called “Call of Duty: Modern Warfare II,” topped $1 billion in the game’s first 10 days on the market. And the firm’s new “Call of Duty Warzone 2.0” is expected to generate revenue throughout 2023.
Microsoft’s executive vice president of gaming, Phil Spencer, has repeatedly assured both Sony and gamers that Microsoft will make “Call of Duty” available on Sony’s PlayStation platform. And the company has confirmed it's willing to make that promise legally binding for a 10-year term.
Large gaming companies like Microsoft and Sony have a history of making prized game franchises exclusive to their consoles and services. Gamers, for example, who are major “Call of Duty” fans are likely to invest in an Xbox, rather than a PlayStation, if the Xbox is the only console offering the game.
After acquiring ZeniMax for $7.5 billion in 2021, Microsoft made the company’s highly anticipated game “Starfield” an Xbox and PC exclusive. ZeniMax is the publisher behind studios including Bethesda, which is responsible for iconic titles like “The Elder Scrolls” and “Fallout” series. And though “Starfield” is a new franchise, the fact that it’s coming from the same company behind those titles makes it a hot property.
Microsoft is no stranger to antitrust battles with government regulators. In one of the most infamous antitrust cases in U.S. history, the U.S. government accused Microsoft of illegally blocking third-party software makers from launching web browsers on Windows PCs.
The suit dragged on from 1998 through 2001, and critics say was part of the reason Microsoft missed out on competing against Apple and Google during the smartphone wars.
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Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.