FTC: Microsoft's ZeniMax deal is evidence against Activision merger
Microsoft has form for making games Xbox-exclusive after an acquisition
The US Federal Trade Commission (FTC) says Microsoft's actions after acquiring ZeniMax and Bethesda provide "strong supporting evidence" for questioning the company's acquisition of Activision Blizzard.
In its court filing [pdf], the FTC says the way Microsoft managed the acquisition of studios under ZeniMax Media in 2021 is an indication of how it could handle the games produced by Activision-Blizzard's studios.
Microsoft first announced its intent to acquire Activision-Blizzard, which develops popular franchises including Call of Duty, Overwatch and Warcraft, in January last year - at the same time as Activision was being rocked by a sexual harassment scandal that sent its share price plummeting.
Multiple countries have since okayed the deal, but regulators in the UK and USA have so far held out against it.
Last week, the FTC asked for a temporary restraining order to halt the $69 billion deal ahead of a hearing, due to start today.
The agency's most recent filing highlights Microsoft's eagerness to make games exclusive to Xbox.
"Defendants put great stock in Microsoft's concerns about 'infuriating gamers' if it were to foreclose rivals' access to Activision content… But those same concerns did not stop the ZeniMax decision," the court documents read.
Monopoly concerns
Microsoft acquired ZeniMax and its collection of studios, including Bethesda, in 2021. After completing the deal the company designated two new games, Redfall and Starfield, as Xbox console exclusives.
Based on that precedent, the FTC says Microsoft could take the same route with Activision-Blizzard games, despite the company's ongoing efforts to secure 10-year commitments for Call of Duty on other platforms.
Being one of the world's two largest gaming console manufacturers, alongside Sony, Microsoft's potential acquisition of Activision raises monopoly concerns.
Regulators believe Microsoft could use its position to marginalise its primary console rival, especially in the realm of cloud gaming.
While the European Commission has granted approval for the proposed deal, the UK's CMA opposed it in April, effectively blocking the transaction. It said the acquisition could impact the future of the expanding cloud gaming industry in the UK.
Microsoft argues that it has already signed cloud gaming agreements with Ubitus, Boosteroid and Nvidia, enabling Xbox PC games to be playable on these competing cloud gaming services.
The company has signed a similar deal with Nintendo to expand the availability of its games on different platforms.
Stakeholders try to slow and block acquisition
The FTC is pursuing a preliminary injunction to impede the acquisition, aiming to halt it before its scheduled close on 18th July.
Should the court rule in favour of the FTC and grant the injunction, Microsoft may need to renegotiate the deal and extend the deadline.
Attorneys representing a group of gamers who are suing to block the deal on antitrust grounds made a separate appeal to the US 9th Circuit Court this week. They claim that a redacted internal Microsoft email contains evidence suggesting that Microsoft is aiming to eliminate Sony's PlayStation business as a competitor.
Although the specific contents of the redacted message remain undisclosed, the plaintiffs claim it was sent by Matt Booty, the head of Xbox game studios at Microsoft, to Tim Stuart, Microsoft's chief financial officer for Xbox.
In its legal filings, Microsoft characterised the email as an "internal exchange" and advocated for it to remain sealed.
Microsoft's legal team said the document has had no influence on the court's rulings thus far.
According to a Microsoft representative who spoke with Axios, the company is legally unable to share the contents of the email. However, they confirmed that the email was sent by Booty in 2019.