FTC Has ‘No Grounds’ to Challenge Microsoft’s Activision Buy, Says Activision

Microsoft’s Activision Blizzard buy will benefit gamers, employees and competition globally, “as multiple industry participants and antitrust regulators around the world have recognized,” said Activision’s answer Friday (docket 3:23-cv-02880) in U.S. District Court for Northern California in San Francisco to the FTC’s June 12 complaint to block the transaction (see 2306120074). Activision’s answer followed a five-day evidentiary hearing that ended June 29 on the FTC’s motion for a preliminary injunction to stop the transaction from closing (see 2306150001).

The FTC “purposefully delayed” filing a federal complaint for more than six months after initiating an administrative proceeding to block the transaction, said Activision’s answer. The agency “continues to ignore the real-world evidence and settled law that squarely contradict its ideologically-fueled efforts,” it said.

The commission’s opposition rests on the “nonsensical theory” that after acquiring Activision, Microsoft’s Xbox will withhold or degrade other gaming platforms’ access to Call of Duty games, said Activision’s answer. But “in the real world,” Xbox has committed to making Call of Duty “more widely available than ever before,” it said. The FTC’s idea that a single game or franchise “is the key to the continued competitive vigor of the highly dynamic video game industry is facially absurd and contradicted by the plain facts,” it said.

The FTC asks the court to do something “without any precedent in at least the last half-century” by enjoining a vertical merger under Section 13(b) of the FTC Act, said Activision’s answer. The FTC’s case fails at the start because Xbox doesn’t have the ability or incentive to withhold Call of Duty from its competitors, it said. “It would be economically irrational for Xbox to withhold Call of Duty from its competitors, and regardless, Xbox cannot do so,” it said. After agreeing to buy Activision, Microsoft reached agreements to bring Call of Duty to Nintendo and to five leading cloud gaming services for 10 years, it said. It made the same offer to Sony, but the PlayStation maker “refused to accept,” it said.

Even if Microsoft somehow had the incentive and the ability to withhold Call of Duty from Sony, doing so wouldn’t constitute a substantial lessening of competition, said Activision’s answer. The acquisition of a single game by Xbox, the third-place console manufacturer, can’t “upend this highly competitive industry,” it said. “Exclusive titles are a common method by which gaming platforms compete, and Sony and Nintendo both have vastly larger libraries of exclusive content than Xbox,” it said. Call of Duty isn’t essential content for any platform, “and the vast majority of gamers do not even play Call of Duty at all,” it said.

The FTC ultimately “has no grounds to challenge this merger,” said Activision’s answer. The deal “will increase competition and expand access across multiple sectors of the gaming market,” it said: “The FTC’s request for injunctive relief should be denied.”