Techspace - A US district judge has
granted a Federal Trade Commission request to temporarily block Microsoft's $69
billion purchase of video game maker Activision Blizzard and is holding a
hearing next week.
The US Federal Trade Commission (FTC) said the deal, which would be
the largest in the history of the video game industry, could
"substantially reduce competition" in the sector.
The move came after Britain blocked the deal fearing it would hurt
competition, but the EU agreed.
Microsoft's bid to acquire video game maker Call of Duty has been
approved by the EU but blocked by UK competition authorities, while the FTC,
the US authority, argues that the transaction will give Microsoft's Xbox video
game console exclusive access to Activision's games, leaving behind Nintendo
and Sony PlayStation consoles. out in the cold.
Microsoft says the deal will benefit gamers and game companies
alike, and has offered to sign a legally binding agreement decree with the FTC
to provide Call of Duty games to rivals including Sony for a decade.
On Tuesday, June 13 Judge Edward Davila scheduled a two-day
evidentiary hearing at the request of the FTC for a preliminary decision on
June 22 and 23 in San Francisco. Without a court order, Microsoft could close
the deal as early as Friday.
The FTC, which enforces antitrust laws, asked an administrative
judge to block the transaction in early December. The evidentiary hearing in
the administration process will begin on August 2.
Based on the final hearing in June, a federal court will decide
whether a preliminary injunction that will last during an administrative review
of the case is necessary.
Microsoft and Activision must file legal arguments against the
initial decision by June 16. The FTC should reply by June 20.
The day before, Activision said that the FTC's decision to seek a
federal court order was "a welcome update and one that expedites the legal
process". On Tuesday, he declined to comment.
Microsoft said on Tuesday that "accelerating legal proceedings
in the US will ultimately bring more choice and competition to the gaming
market." A temporary restraining order makes sense until we can receive a
decision from the court, which is moving quickly.”
The FTC said in court filings that "a preliminary injunction is
required to ... prevent temporary damages" while regulators determine
whether the "proposed acquisition violates US antitrust laws".
Microsoft's proposed takeover of Activision has split global
regulators, and for a deal to pass through the parties require approval from
regulatory agencies in the UK, EU, and US.
The European Commission has approved the acquisition, saying that
Microsoft's offer of a 10-year free licensing deal - which promises European
consumers and cloud game streaming services access to Activision's PCs and game
consoles - means there will be fair competition in the market.
But the UK Competition and Markets Authority (CMA) blocked the deal
in April, saying the takeover would reduce innovation and less choice for
gamers.
Microsoft and Activision criticized the decision and said they would
appeal. Microsoft president Brad Smith said it marked the company's
"darkest day" in four decades working in the country.
Responding to the FTC announcement, Mr. Smith said Microsoft
welcomed "the opportunity to present our case in federal court" in
its efforts to persuade US regulators to allow the completion of the deal.
"We believe the accelerated legal process in the US will
eventually bring more choice and competition to the market," he added.
In December last year, the FTC had asked an internal administrative
judge to block the deal on antitrust grounds, arguing it would give Microsoft's
Xbox exclusive access to Activision's games, leaving Nintendo's console and
Sony's PlayStation in the cold.
William Kovacic, former chairman of the FTC and non-executive
director at CMA England, said the FTC had expressed concern that Microsoft and
Activision might close their deal despite Britain's opposition, and asked a
judge to stop it.
Mr. Kovacic said there was still a chance the takeover could be
completed, but added that the chances were diminishing.
The purchase of Activision, which also makes Candy Crush, is seen as
important for Microsoft as it tries to catch up with its main competitor Sony.
However, this investment effort from Microsoft could be seen as
playing for the future of gaming, with the company betting heavily on its Xbox
Game Pass service, which it describes as "Netflix gaming".
Microsoft believes the future lies in players subscribing to
libraries and streaming games through "cloud gaming", rather than
making one-time purchases - which are the primary way to access games today.
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