A legal battle has unfolded in San Francisco’s courtrooms as Microsoft’s proposed $69 billion acquisition of video game titan Activision Blizzard faces stern opposition from federal regulators. U.S. District Judge Jacqueline Scott Corley is presiding over this high-stakes trial, which is scheduled to span five days and could either make or break the most expensive acquisition in technology history.
The Federal Trade Commission (FTC) is ardently working to convince Judge Corley to issue an order that would stall the takeover until a more comprehensive administrative trial set to begin in Washington on August 2. Should the deal not close by July 18, Microsoft would be obliged to pay a hefty $3 billion breakup fee to Activision.
“Activision makes the games that gamers want to play,” FTC lawyer James Weingarten argued, emphasizing the potential impact of Microsoft’s acquisition on console sales and subscriber numbers. The FTC’s stance is rooted in concerns that Microsoft’s deal with Activision Blizzard might lead to popular game franchises such as Call of Duty and World of Warcraft becoming exclusive to Xbox and other Microsoft subscription services, thereby disrupting competition in the burgeoning $210 billion global video game market.
Microsoft, however, refutes these claims. Beth Wilkinson, Microsoft’s lawyer, characterized the FTC’s arguments as “very naive,” stressing the immense pressure on Microsoft’s gaming division to produce profits that justify the enormous price tag of the acquisition. Wilkinson cited Microsoft’s long-standing commitment to making Call of Duty available on Nintendo’s Switch console and an Nvidia gaming subscription service as evidence that the deal would be favorable for consumers.
Microsoft has also alleged that Sony, a major competitor in the console market, is attempting to sabotage the deal. An email from Sony executive Jim Ryan surfaced during the proceedings, contradicting Sony’s public statements by suggesting that Sony would be “more than okay” if the Microsoft-Activision deal went through.
The trial also saw a few surprises, such as the FTC’s unsuccessful attempt to have Phil Spencer, Microsoft’s executive vice-president of Gaming, promise under oath that Call of Duty would remain on PlayStation and future PlayStations. The judge cut off the FTC’s efforts, seemingly annoyed by their line of questioning.
Despite some blows landing on Microsoft, including an email revealing that Microsoft purchased Bethesda partly due to worries about their game Starfield becoming PlayStation exclusive, the general consensus among observers seems to lean towards Microsoft. Critiques of the FTC’s understanding of the gaming industry and the alleged hypocrisy from Sony have undermined the strength of their opposition to the deal.
The hearings represent a significant trial for the FTC under Chairperson Lina Khan, who is known for her stringent oversight of Big Tech. This courtroom battle with Microsoft comes six months after the FTC took Facebook owner Meta Platforms to court in Silicon Valley to prevent a takeover.
Testimonies from Microsoft CEO Satya Nadella, Activision Blizzard CEO Bobby Kotick, and a videotaped deposition from Ryan are expected in the coming days. Judge Corley’s ruling is not expected until after the Independence Day holiday.
