Today marked the first of a five-day court session that pits Microsoft against the US Federal Trade Commission, in the latest in a series of legal maneuverings over Microsoft’s proposed $69 billion acquisition of video game developer Activision Blizzard.
While several major territories, such as Japan and the EU, have greenlit the acquisition, regulators in both the US and UK have sought to stop it, citing concerns over monopolization, and the potential for Microsoft to achieve a dominant position in the nascent market for cloud gaming.
The court showdown between Microsoft and the FTC is in response to a complaint filed by the FTC on June 12, which seeks a temporary restraining order and preliminary injunction that would prevent Microsoft from closing the Activision Blizzard deal before July 18.
If the FTC is granted its injunction, Microsoft could end up owing Activision Blizzard a $3 billion termination fee as per the terms of the original merger proposal, as it wouldn’t have successfully completed the acquisition by its final deadline. This would force Microsoft to rework the terms of the original deal, which could involve ending its attempt to acquire Activision Blizzard.
Microsoft will attempt to defend against the injunction in San Francisco over the course of five days in court, on June 22, 23, 27, 28, and 29. The case will include testimony from Microsoft CEO Satya Nadella; Xbox head Phil Spencer; head of Xbox Studios Matt Booty; Bethesda Softworks’ Pete Hines; Activision Blizzard CEO Bobby Kotick; Xbox VP Sarah Bond; and one of the acquisition’s most vocal critics, Sony PlayStation head Jim Ryan.
At time of writing, much of the FTC’s case for the injunction, like that of the UK’s Competition and Markets Authority, revolves around Microsoft’s previous acquisition of Bethesda Softworks, and the subsequent decision to make upcoming Bethesda games like Redfall and Starfield console exclusives on Xbox.
If Microsoft’s done that once with a game as highly anticipated as Starfield, the FTC argues, there’s nothing to prevent it from doing it again with hit Activision Blizzard franchises like Call of Duty or Overwatch. That would provide Microsoft with a significant competitive advantage in the field, bordering on a monopoly, particularly in the case of the perennially best-selling Call of Duty franchise.
The Activision Blizzard acquisition would also provide Microsoft with a massive edge in the cloud-gaming market, the FTC argues, as its control of so many of the video game world’s most popular franchises would provide it with a nearly unbeatable advantage over smaller or less established competitors.
Microsoft’s counter-argument has been to offer a number of binding 10-year agreements that legally require it to bring the Call of Duty series to rival platforms, such as the PlayStation or Nintendo Switch.
Even beyond its implications for the future of the Activision Blizzard deal, and hence the future of the Xbox, Microsoft’s day in court is likely to involve some inadvertent bombshells.
The American video game industry is notorious for its secrecy, where many companies maintain firm control over their internal data. As a result, public court cases in the games industry that involve any degree of testimony or discovery tend to come hand-in-hand with some interesting reveals, such as when 2021’s Apple vs. Epic ended up disclosing some of Microsoft’s internal sales data about Xbox hardware.
At time of writing, the big disclosure on day one of the hearing has been from Sony’s Ryan, who’s built a reputation over the last year-and-a-half as the primary opponent of the Activision Blizzard acquisition.
A newly-unsealed email contradicts Ryan’s public stance, however, with Ryan saying in private that he’s “pretty sure we will continue to see Call of Duty on PlayStation for years to come.”
Update, 1:30 PM PST: “Today showed Sony has known all along we’ll stand by our promise to keep games on its platform and made clear its work to lobby against the deal is only to protect its dominant position in the market,” a Microsoft spokesperson tells GeekWire.
