Microsoft Says it Could Abandon Activision Deal if Judge Delays It

The first day of a week-long hearing that could decide the outcome of Microsoft’s $70 billion acquisition of video game giant Activision Blizzard took place on Thursday, kicking off with promises from Microsoft’s side. If a federal judge granted an injunction to delay the closing of the deal, Microsoft could end the deal. not at all.

“This will determine whether the deal goes forward or not,” said Beth Wilkinson, Microsoft’s lead attorney. He added that a loss could force the company into a “three-year management nightmare” and could sink the deal it hopes to close by July 18.

This will lead to hearings in federal court in San Francisco. So the Federal Trade Commission began to argue that Microsoft’s acquisition of Activision and its popular games like Call of Duty would have a devastating effect on the video game industry.

The FTC is seeking a preliminary injunction from Judge Jacqueline Scott Corey barring Microsoft from consummating the transaction before the FTC has an opportunity to argue the matter in internal court.

The clash is widely seen as a test of the success of recent efforts to more aggressively constrain the power of tech giants around the world. FTC Chairman Rina Khan argued that big tech companies have a lot of influence over online commerce and communications, allowing anti-competitive behavior that harms consumers.

FTC lead attorney James Weingarten said in court on Thursday, “The transaction, if completed, would prevent the combined company from competing in various markets related to consoles, subscription services and cloud. We have and are likely to have the ability and incentive to do so.” .

Weingarten also said that Microsoft could make Activision’s games exclusive to the company’s Xbox console or lower quality on other platforms in order to make Xbox more attractive to gamers. rice field. He noted that Microsoft previously acquired ZeniMax Media and a suite of game studios for $7.5 billion in 2020, after which Microsoft made some of those games exclusive to the Xbox.

The FTC would also argue that absorbing Activision’s games into Microsoft’s portfolio would give the company an unfair advantage in the nascent cloud gaming market.

Microsoft believes its deal with Activision is good for consumers, and will sell Activision’s games through lower-price options such as Microsoft’s subscription service Xbox Game Pass, as well as third-party platforms such as partner Nintendo and Nvidia. responded that their ability to play partnered.

Wilkinson also argued that it would be nonsense for Microsoft to remove Call of Duty and other titles from other platforms such as Sony’s PlayStation. Because the company would lose a huge chunk of its game revenue. He said Sony had become the “lead plaintiff” of the lawsuit, pointing to an email from Sony Chief Executive Jim Ryan that said he genuinely believed Microsoft would hold back on developing Call of Duty. Suggested not to.

In a separate lawsuit, the FTC accuses Facebook parent company Meta of ditching early competitors when it acquired Instagram and WhatsApp. The company filed a lawsuit against Amazon on Wednesday, accusing it tricked users into signing up for its Prime membership service. But the FTC has also had setbacks. Earlier this year, a challenge to Meta’s acquisition of the VR startup fell through after a judge refused to block the deal from closing.

The FTC initially used its internal court to challenge Microsoft’s bid for Activision. However, the court does not have the legal authority to block the transaction. Earlier this month, the FTC asked the U.S. District Court for the Northern District of California to intervene because it feared Microsoft would try to complete the deal despite legal issues.

Judge Corey’s Courtroom Hearing Could Be a Definitive Test for the FTC If Microsoft Wins, It Shows a Weakness in the FTC’s Case and Could FTC Withdraw its Challenge to the Deal be. But the FTC’s victory could prove effective in a broader FTC challenge, putting renewed pressure on Microsoft and Activision to rethink their multi-billion dollar corporate marriage. have a nature.

Sony, whose PlayStation console competes with Microsoft’s Xbox, has been a vocal critic of the deal. Sony claims PlayStation gamers may lose access to Call of Duty, the massive series that has made more than $30 billion in lifetime revenue, if Microsoft decides to make the game an Xbox exclusive. are doing. Microsoft denies such a thing.

Most governments around the world, including the European Union, have approved the deal, but Microsoft suffered a setback in April when British regulators blocked the deal. This decision is pending appeal.

The list of notable witnesses scheduled to testify before Judge Corey next week includes Microsoft CEO Satya Nadella. Amy Hood, the company’s chief financial officer. Bobby Kotick, CEO of Activision. And Phil Spencer, CEO of Microsoft’s Xbox division. Sony CEO Ryan will attend via a pre-recorded video affidavit.

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