FTC sues Xbox Activision Blizzard deal citing Bethesda games exclusivity, Microsoft responds

The Federal Trade Commission (FTC) is officially seeking to block Microsoft's acquisition of Activision Blizzard, citing the exclusivity of Bethesda titles, Starfield and Redfall, on Xbox and PC platforms.

Microsoft co-chair and president Brad Smith has complete confidence in their case, believing the proposed acquisition will expand competition and create more opportunities for gamers and game developers.

Earlier in 2022, Microsoft, the tech giant behind Xbox, proposed a nearly $70 billion acquisition of Activision Blizzard King, one of the leading developers and publishers, known for titles such as Call of Duty, Diablo, Overwatch, and Candy Crush.

Since then, the deal has been through turmoil with much pushback. The biggest opposition comes from Sony, the parent company of PlayStation, Xbox's console competitor, and the current market leader.

While Xbox originally proposed June 2023 for the acquisition closure, it's expected to be delayed by the FTC's decision to pursue legal action.

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FTC seeks to block Activision acquisition as “Microsoft has already shown that it can and will withhold content from its gaming rivals”

The Federal Trade Commission is an independent agency of the United States government whose principal mission is to enforce civil antitrust law and promote consumer protection.

Led by chair Lena Khan, the committee is tasked with investigating any major acquisitions and enforcing anti-competitive laws. Previously, the FTC played a major role in blocking Nvidia's proposed acquisition of ARM.

Earlier today, the FTC published an official report stating that the committee seeks to block the proposed acquisition. The agency alleges that it will enable Microsoft to:

"Harm competition in high-performance gaming consoles and subscription services by denying or degrading rivals’ access to its popular content."

The FTC cited the upcoming Bethesda Entertainment titles Starfield and Redfall as examples, both of which are set to be exclusive to the Xbox platform and PC. This was preceded by Xbox's acquisition of Zenimax, the parent company of Bethesda, back in 2019. Holly Vedova, the Director of the FTC’s Bureau of Competition stated regarding the matter:

"Microsoft has already shown that it can and will withhold content from its gaming rivals. Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets."

As per FTC's report, Activision Blizzard is one of the top video game developers in the world that creates and publishes high-quality video games for multiple devices. The ensemble includes titles such as Call of Duty, World of Warcraft, Diablo, and Overwatch, bringing in millions of users across multiple platforms. However, that could change if this deal proceeds.

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Microsoft responds to FTC's filing by stating full confidence in their case and preparing to present it in court

Microsoft's Vice Chair and President Brad Smith addressed the FTC's decision by stating that the proposed acquisition is good for:

"Expanding competition and creating more opportunities for gamers and game developers."

Xbox head Phil Spencer and other executives, including CEO Satya Nadella, have been stating since their intention to provide Call of Duty on other competing platforms, including Sony's PlayStation.

Xbox recently also committed to bringing Call of Duty to Nintendo platforms for the next 10 years while continuing to provide it on Steam, where the series recently returned with Modern Warfare 2.

Xbox also reportedly offered Sony a commitment to continuing Call of Duty's rollout on PlayStation. However, it was not reciprocated.

From a business perspective, Call of Duty's most successful entries have been free-to-play battle royal titles, Warzone (Caldera) and Warzone 2.0, which benefit from having a larger playerbase.

As such, making the title Xbox exclusive will severely lower the number of users and significantly affect their revenue earnings. Furthermore, industry experts believe Xbox and PlayStation's interests lie in different directions and aren't competing in the same playground.

According to them, one targets to make their flagship console irresistible, while the other focuses on making games accessible everywhere, irrespective of hardware limitations, through cloud stream.

While it is uncertain which way the case will go, this is unequivocally the biggest huddle Microsoft and Activision Blizzard have faced so far.