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Microsoft will face the U.S. government on Thursday in its first court showdown in nearly a quarter of a century, as the Federal Trade Commission moves to prevent the software company from moving quickly to complete its $75 billion acquisition of gaming company Activision Blizzard. plan.
The hearing in San Francisco federal court comes 10 days after regulators sought an injunction to block the deal pending the outcome of the agency’s separate antitrust challenge.
The conflict marks Microsoft’s first confrontation with the United States in an antitrust case since the Justice Department accused the company of using illegal means to maintain its PC monopoly in the 1990s. The court continued to order the breakup of the company in 2000, but that order was overturned on appeal and the case was later resolved.
The FTC first moved to block the Activision deal late last year, filing a lawsuit in administrative court scheduled to begin Aug. 2. However, it turned to federal court earlier this month to prevent the company from completing the deal before then, something it said would prevent any harm to competition while its case was heard.
The agency claims that after the acquisition, Microsoft will have a strong financial incentive to transform Activision’s most popular games, including its call of Duty Franchise, access to exclusive properties only available on its own platform. It claims this will hurt competition in independent markets such as console games, game libraries offered via subscription and cloud gaming.
The FTC’s objection is more comprehensive than that of the UK’s Competition and Markets Authority, which sought to block the deal simply on the grounds of potential harm to the fledgling cloud gaming market. The European Commission has approved the transaction.
In a filing over the weekend, the companies said the price Microsoft agreed to pay Activision was based on making its games more widely available, not limiting them. They also claim that not offering those titles would only erode Sony’s lead in big console gaming. Microsoft offered Sony a 10-year license to Activision games and claimed the Japanese company was trying to kill the acquisition by rejecting the offer.
Microsoft’s 18-month deadline to complete the acquisition expires on July 18, adding to the pressure to close the deal before the FTC’s administrative proceedings begin. If the deal doesn’t go through, the software company will have to pay a $3 billion breakup fee. In their filing last week, the companies claimed that, therefore, a preliminary injunction delaying the closure “would…” . . will almost certainly be a deal breaker.”
Both companies are lobbying hard to allow the acquisition to proceed on the original terms, and a person familiar with the matter said they could easily agree to an extension if the FTC succeeds in preventing the deal from closing immediately.
The chief executives of Microsoft, Satya Nadella and Activision, as well as Bobby Kotick, are among the witnesses scheduled to appear in person during the five-day hearing.