Microsoft ready to fight for $69 billion Activision deal


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Microsoft Corporation is ready to fight to win the acquisition of the game company Activision Blizzard Inc. worth $69 billion if the US Federal Trade Commission files a lawsuit to block the sale, according to a person familiar with the matter.

The Xbox maker hasn’t had any conversations with the FTC about remedies or concessions to reach an approved deal, said one person who requested anonymity discussing a confidential matter. FTC staff are concluding their investigation and are expected to make a recommendation soon, the person added. FTC commissioners will then vote on whether to file a lawsuit.

In the event that the FTC tries to stop the case, Microsoft will be prepared to challenge that decision in court, said one person, who asked not to be named, speaking about internal strategy. Bloomberg Intelligence antitrust analyst Jennifer Rie said she wouldn’t 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. win, and Microsoft could prevail — though a legal battle could drag on even longer. the end date of the agreement. Microsoft said it expected to close the transaction by June 30.

Microsoft’s other option would be to walk away from the deal in the face of a challenge from the FTC. That’s what the company did in 1995 when the US government sued to block its acquisition of accounting software maker Intuit Inc., with Microsoft saying it didn’t want to get involved in a legal battle long term.

Microsoft’s best chance of winning 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 don’t like such deals — especially after this month’s Ticketmaster explosion brought attention back to a failed 2010 Justice Department deal with Live Nation. Entertainment Inc.

The FTC is taking an aggressive approach towards mergers, especially when it comes to technology and digital markets, but did not say if it plans to sue to block the deal.

In July, the company sued to block Meta Platforms Inc. buys virtual reality fitness app Inside, claims that the transaction may eliminate competition in some markets, known as “new competition”.

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

The US is one of at least three jurisdictions where regulators are questioning the blockbuster transaction, which would dramatically change the video game landscape and put Microsoft in No. 3 in the global games market after Tencent Holdings Ltd. and Sony Corporation. .

European and UK antitrust authorities have raised questions about whether the popular Call of Duty game franchise will continue to be made available to gamers on Sony’s PlayStation console, and whether the merger allows Microsoft to play a dominant role in the growing but still small market for cloud game services. .

Microsoft has offered Sony a deal in which it will offer Call of Duty games on PlayStation for a decade, although the companies will need to come up with financial terms for that deal, the person said. said.

The software giant has consulted with regulators about those discussions, but has not formally proposed a fix because review process the person says that it hasn’t reached that stage yet.

It doesn’t make any sense financially or strategically for Microsoft to keep the best-selling game franchise away from PlayStation because more copies of the game are sold on PlayStation than Xbox, and because such a move would anger gamers. in a way that could negatively impact Microsoft. In fact, the acquisition would not be financially viable for Microsoft if it cut out Call of Duty on PlayStation, the person said.

Due to the different stages of different investigations around the world, Microsoft will likely discuss this step first with the European Commission, which has set a deadline of March 23 to complete. in-depth review of the agreement.

This person said Microsoft is hoping that the remedies it offers to the EU will be effective enough globally. However, it is possible that UK regulators may want additional steps from the company.

The UK’s Competition and Markets Authority is currently conducting an in-depth investigation into agree after an initial investigation discovered concerns in the game console, multi-game subscription service, and cloud gaming marketplace.

The watchdog said in an October document setting out the scope of its investigation that it feared the transaction could allow Microsoft to gain superior market power, allowing it to weed out competitors. like Sony. While Microsoft has promised it won’t do this due to reputational damage to Xbox or Call of Duty, the watchdog said it has not identified “convincing evidence” to believe the claims. that father.

The UK agency has stepped up scrutiny of the dominance of big tech companies since it gained new powers after Brexit.

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

2022 Bloomberg LP
Distributed by Tribune Content Agency, LLC.

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