Microsoft is ready to fight for its $69 billion deal with Activision

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The Xbox maker has not had discussions with the FTC about remedies or concessions aimed at getting the deal approved.

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

The Xbox maker has not had discussions with the FTC about solutions or concessions aimed at getting the settlement approved, said the person, who asked not to be named because the matter was confidential. FTC staff are finalizing their investigation and are expected to make a recommendation soon, the person added. The FTC commissioners would then vote on whether to bring a case.

Should the FTC try to block the case, Microsoft is preparing to challenge that decision in court, said the person, who asked not to be named discussing the internal strategy. Bloomberg Intelligence antitrust analyst Jennifer Rie said she wouldn’t be surprised if the FTC sues to block the deal, but noted that it would be hard to win a court fight for the executors and that Microsoft could prevail, though a legal battle could drag on. . beyond the agreement termination date. Microsoft has said it expects to close the transaction before June 30.

Microsoft’s other option would be to back out of 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 the acquisition of accounting software maker Intuit Inc., and Microsoft said it didn’t want to face a lengthy legal battle.

Microsoft’s best chance of getting approval to buy Activision is to persuade the Biden administration to agree to a deal in which it promises it won’t deny rivals its popular titles.

But Biden’s antitrust enforcers don’t like such deals, especially after this month’s Ticketmaster blowout again brought a failed 2010 Justice Department deal to Live Nation Entertainment Inc to the spotlight.

The FTC is taking an aggressive approach to mergers, especially when it comes to technology and digital markets, but hasn’t indicated whether it plans to sue to block the deal.

In July, the agency filed a lawsuit to stop Meta Platforms Inc. from buying virtual reality fitness app Within, claiming the transaction could eliminate competition in some markets, known as “infant 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 raising questions about the blockbuster transaction, which would dramatically alter the gaming landscape and propel Microsoft to the No. 3 spot in the global gaming market behind Tencent Holdings Ltd. . and Sony Group Corp. .

European and UK antitrust bodies have raised questions about whether the popular Call of Duty gaming franchise will remain available to gamers on Sony’s PlayStation console and whether the merger would allow Microsoft to take a dominant role in the burgeoning but still small market. of cloud gaming services. .

Microsoft offered Sony a deal that would make Call of Duty games available on PlayStation for a decade, though the companies would have to agree to the financial terms of that deal, the person said.

The software giant has informed regulators about those discussions, but has not formally submitted a remedy proposal because the review process has not advanced to that stage, the person said.

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

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

Microsoft hopes that the remedies it offers to the EU will be sufficient globally, the person said. However, UK regulators may want additional action from the company.

The UK Competition and Markets Authority is currently in the midst of an in-depth investigation of the deal after an initial investigation found concerns in the markets for game consoles, multi-game subscription services and cloud gaming.

The watchdog said in an October document setting out the scope of its investigation that it is concerned the transaction could allow Microsoft to gain outsized market power that would allow it to weed out competitors like Sony. Although Microsoft promised it would not do this because of the reputational damage to Xbox or Call of Duty, the watchdog said it had not identified “persuasive evidence” to believe those claims.

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

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

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