Microsoft’s historic $102 billion video game deal is in doubt

In a letter, Activision Blizzard chief executive officer Bobby Kotick assured employees he is confident that the deal will close.

“The allegations that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” Kotick said, adding that the combined company would be “good for players,” despite a regulatory environment that he says is “focused on ideology and misconceptions about the tech industry.”

In its release announcing the lawsuit, the FTC cited Microsoft’s decision to make two upcoming titles by newly acquired unit Bethesda Softworks exclusive to Microsoft’s platforms despite assurances the company gave to EU regulators that it had no incentive to withhold games from rival consoles.

The lawsuit is part of an effort by FTC Chair Lina Khan to more aggressively police mergers, particularly those by the biggest tech platforms. Since President Joe Biden appointed her to helm the agency in June 2021, it has killed mergers between Lockheed Martin Corp. and Aerojet Rocketdyne as well as Nvidia’s bid to buy SoftBank Group’s Arm. The FTC heads to federal court Thursday in San Jose, California, in an effort to block Meta from buying a virtual reality startup.

Although Brazilian antitrust officials cleared the Microsoft-Activision deal in October, other competition regulators, including the UK and the European Union, have also raised concerns. Those two bodies aren’t set to issue decisions on the deal until next year.

Microsoft on Tuesday announced a deal to bring Call of Duty to the Steam PC gaming platform and Nintendo consoles. The company said it’s also offered a proposal that would keep Call of Duty on Sony’s PlayStation for the next 10 years, but the Japanese electronics giant has so far rebuffed efforts to work out a resolution.

Joost van Dreunen, a video games expert who teaches at New York University’s Stern School of Business, said antitrust authorities have become sceptical of pledges, particularly by the tech platforms, about future behaviour. Van Dreunen provided comments on the deal to UK competition officials.

“I don’t think it’s ultimately enough for the FTC to go on,” van Dreunen said of Microsoft’s pledge.

The Redmond, Washington, tech giant sought to placate possible labor concerns about the merger by reaching an agreement with the Communications Workers of America, which also represents employees in the gaming industry. In the pact, Microsoft pledged to take a neutral approach if employees express interest in joining a union.

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The company also said it would stop using non-compete or confidentiality clauses to bar workers from talking about discrimination or harassment as part of a settlement or separation deal.

The FTC has publicly raised concerns about the use of non-competes and the impact of mergers on labor conditions.

The agency’s in-house proceedings, overseen by Administrative Law Judge D. Michael Chappell, generally take several months to a year to resolve.