April 22, 2024

MediaBizNet

Complete Australian News World

Microsoft and Activision face FTC challenge for $75 billion deal

Microsoft and Activision face FTC challenge for $75 billion deal

Get free Microsoft Corp updates

Microsoft is set to begin its first court showdown with the US government in nearly a quarter of a century on Thursday, as the Federal Trade Commission moves to stop the software company from acting quickly to close its planned $75 billion purchase of gaming company Activision Blizzard.

The hearing in San Francisco federal court comes 10 days after the regulator sought an injunction blocking the deal pending the outcome of a separate antitrust challenge from the agency.

The clash marks the first time Microsoft has faced off against the United States over an antitrust case since the Justice Department accused it of using illegal means to maintain its monopoly on computers in the 1990s. The court went on to order the company to be broken up in 2000, although the order was overturned on appeal and the case was subsequently settled.

The FTC took the first action to block the Activision deal late last year, launching an administrative court case set to begin August 2. However, it went to federal court earlier this month to prevent the companies from closing the deal before then, something it said it would prevent any harm to competition while its case is heard.

The agency claims that after the acquisition, Microsoft will have a strong financial incentive to transform Activision’s most popular games, including its own. Call of duty franchise, in exclusive properties only available on their own platforms. It claimed that this would hurt competition in the separate markets for console games, game libraries available through subscription, and cloud games.

READ  Warzone 2.0 is getting stats soon, but your current kills don't matter

The FTC’s objections are more sweeping than those of the UK’s Competition and Markets Authority, which only sought to block the deal because of the potential harm to the emerging cloud gaming market. The European Commission approved the deal.

In a report last weekend, the companies said the price Microsoft agreed to pay for Activision was based on making its games more widely available, not restricting it. They also claimed that even blocking games would only lead to a “slight decline” in the big console gaming lead that Sony enjoyed. Microsoft offered Sony a 10-year license for Activision games and claims that the Japanese company rejected the offer in an effort to cancel the acquisition.

Microsoft’s 18-month deadline to complete the purchase expires on July 18, adding pressure to close the transaction before the FTC’s administrative law case begins. The software company will have to pay a $3 billion break-up fee if it fails to complete the deal. In its filing last week, the companies alleged that because of this, the initial protective order delaying the shutdown “would. . . It’s almost certain to spoil the deal.”

Both companies lobbied hard for the acquisition to be allowed on its original terms, and a person close to the situation said they could easily agree to an extension of their deal if the FTC succeeds in preventing it from immediate closure.

Microsoft CEOs Satya Nadella, Activision and Bobby Kotick are among the witnesses scheduled to appear in person at the five-day hearing.