FTC vs. the Microsoft-Activision deal: What you really need to know

The fate of Microsoft’s bid to buy Activision – one of the first and oldest third-party publishers in console video games – now rests in the hands of one person. The companies and the Federal Trade Commission spent a week in federal court over the latter’s request for a judge to stop the deal.

Testimony and closing arguments are now done. Since last Thursday, longtime fans of both Xbox and PlayStation have been getting a glimpse into the fast-paced, hard-hitting business world of platform owners and major video game publishers. What’s happening now could not only be a historic moment in video games, it could also shape how millions play them for years to come.

Here’s what you really need to know about the past week, where things are going and whether this mega deal will go ahead.

What is happening now in the Microsoft-Activision FTC case?

The judge in the Federal Trade Commission case against Microsoft over the $68.7 billion acquisition of Activision Blizzard is expected to decide before July 18 whether the deal should be blocked. That’s the closing date for the proposed buyout of Call of Duty’s publisher, World of Warcraftand Overwatch.

The Federal Trade Commission filed a lawsuit in December to block the deal. This hearing concerns the government’s request for a restraining order to halt all merger activities and prevent them from being shut down. Judge Jacqueline Scott Corley temporarily granted that on June 13; her next choice is whether to make that permanent.

The restraining order would stop the deal until the FTC’s overall lawsuit against the Microsoft-Activision Blizzard deal is resolved.

What happens if the court decides for Microsoft and Xbox?

The takeover would go through and the deal would become a lot harder for the FTC to close. The FTC should consider whether it would be worth it, since a ruling denying its motion would be seen as a vote of no confidence in its antitrust case. That case was brought under the FTC’s own administrative law system (actually an internal court), so neither Corley nor her judicial district would be involved.

Overall, two other major regulatory bodies, the United Kingdom and the European Union, have already ruled on the deal between Microsoft and Activision. The British Competition and Markets Authority decided in April to block it; the European Union approved in May. While these three act independently, two instances of agreement can convince the third to change its mind. Microsoft could also move the offices it or Activision has in the UK if Corley goes through with the deal.

What happens when the judge decides for the FTC?

Then the deal won’t close and it seems likely that Microsoft will back out altogether and pay Activision a termination fee (presumably $3 billion). In addition to that fine, Microsoft attorney Beth Wilkinson told The New York Times that a lawsuit in the FTC’s internal court would be a “three-year administrative nightmare” that would completely undermine the deal, regardless of the verdict.

Image: inXile Entertainment/Xbox Game Studios

If Microsoft wins, which games will be exclusive to Xbox?

With Xbox chief financial officer Tim Stuart in the stands Thursday, the FTC revealed a November 2021 email between him and Xbox Game Studios head Matt Booty in which Phil Spencer, general head of Xbox, decreed that all ZeniMax games would henceforth be PC and Xbox exclusives.

“All games in the future?” replied Stuart. “Not just new IP, but ALL future games? Wow.”

So we can pretty much count on the next Elder Scrolls game (which will feature a Microsoft lawyer maybe let it slip is targeting a 2026 launch) is an Xbox and PC exclusive, though that hasn’t been explicitly said yet.

Xbox Game Studios consists of 22 studios, many of which are already creating Xbox-exclusive titles, such as the Forza Motorsport or Gears of War series. Several of those studios were acquired in 2018, when Microsoft acquired inXile Entertainment (Wasteland), Ninja Theory (Hellblade), and Obsidian Entertainment (The outside worlds). inXile’s next game, the action RPG Clockwork revolution, is exclusive to Xbox. So is the next game from Obsidian, Grantedcoming sometime next year.

As for Call of Duty, Microsoft’s witnesses and lawyers repeatedly stressed that the company has contacted Sony Interactive Entertainment with an already signed agreement to keep Call of Duty on PlayStation equal in features and content “for at least several years.” In September, SIE boss Jim Ryan rejected the offer as “insufficient”. After Microsoft offered both Sony and (remarkably) Nintendo 10-year agreements to have Call of Duty parity on their platforms.

At last week’s hearing, FTC attorney James Weingarten forced a sworn pledge from Spencer to keep Call of Duty on PlayStation platforms. Weingarten pushed Spencer even further, asking him to make that promise regardless of the terms Sony expected, but Corley, sounds impatienttold Weingarten to move on to other questions.

Image: Infinity Ward/Activision

Who will win in Microsoft vs. the FTC?

Observers, analysts, expertsAnd of such I’ve had a great time over the past week piling up the claims and counter-claims filed, and guessing at Corley’s general attitude to what she’s heard. (She alone shall rule; this is not a jury trial.)

The FTC has focused almost entirely on exclusive consoles, as the area where Microsoft’s purchase of Activision hurts the market and consumers. Within that category, FTC lawyers have focused on Call of Duty, and what would happen if PlayStation owners lost access to it, as the area of ​​greatest damage.

To that end, the government made strong points when it was revealed that Microsoft had bought ZeniMax Media (owner of Bethesda Softworks) because it feared Star field, which launches in September, was set to become a PlayStation exclusive. Instead of, Star field is exclusive to Xbox and PC.

But emails and taped testimonials from Ryan, the president of Sony Interactive Entertainment, seem to undermine that point. Ryan said he didn’t see Bethesda’s exclusivity redfall or even Star field be anti-competitive. Additionally, in an email to a colleague, Ryan said, “It’ll be fine.” He said, after talking to Spencer and Activision boss Bobby Kotick, “I’m pretty sure we’ll continue to see COD on PlayStation for many years to come.”

Corley sometimes seemed to confuse the FTC lawyers with her questions during closing arguments. Corley noted data from Microsoft’s expert witness, economist Elizabeth Bailey (who appeared under conditions from both sides), showing that 62% of PlayStation owners don’t play Call of Duty at all. She also chided Weingarten, reminding that “it’s not the harm to Sony that we care about – it’s the harm to the consumer.” Representatives from Microsoft and Action have made this a topic of conversation the past months.

“All this for a shooter video game?” said Corley later. “We’re worried about competition for this one shooter video game?”