A Ten-Gamer Revolt is the Latest Snag in Activision Blizzard Deal

Just when you thought it couldn’t get any worse for Xbox Game Studios regarding the acquisition of Activision Blizzard, ten concerned gamers have now joined the United States Federal Trade Commission in taking the fight to the courts in the hopes of blocking the deal from going forward.

Citing the Clayton Antitrust Act, the concerned gamers raise grievances of the potential for “threatened loss or damage” which may result from the deal, particularly considering that recent game announcements from Zenimax (including Bethesda and id) have been exclusively targeted at Xbox platforms (Series X/S and Windows, to be specific) following that particular acquisition. Along with Nintendo’s loss of access to Rare for development early on in the Xbox pantheon.

The Legal Case Against the Deal

According to the legal filing, the plaintiffs contend that “in addition to the elimination of a significant rival, the proposed acquisition may give Microsoft far-outsized market power in the video game industry and may enable Microsoft to foreclose rivals to critical inputs and important markets. The current trend toward concentration, the lessening of competition, and the tendency to create a monopoly in the video game industry was already harming competition at an alarming rate before the proposed acquisition was announced.

Both companies are the products of substantial campaigns to acquire, merge with, and consolidate numerous video game companies to achieve their current stature in the video game industry. If Microsoft’s proposed acquisition of Activision Blizzard is allowed to proceed, the video game industry may lose substantial competition, and Microsoft may have far-outsized market power, with the ability to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition.”

The complaint also notes that Xbox is a platform of its own and that access to games could be limited or withheld completely from competing devices like Nintendo’s Switch or Sony’s PlayStation.

“Microsoft would have the ability to foreclose important inputs to rivals of console gaming by making some or all of Activision Blizzard’s important catalog of games, including Call of Duty, exclusive to Microsoft platforms or partially exclusive,” reads the complaint.

“Exclusivity could take the form of “(i) making [Activision Blizzard] content unavailable on rival consoles (i.e. exclusive to Xbox), (ii) making [Activision Blizzard] content available for release on rival console gaming platforms at a later date compared to Xbox (i.e. timed exclusivity), (iii) degrading the quality of [Activision Blizzard] gaming content available to rival console gaming platforms, (iv) making features or upgrades of [Activision Blizzard] games unavailable to other console gaming platforms (i.e. content exclusivity), and/or (v) raising the wholesale price of [Activision Blizzard] content on rival consoles gaming platforms.”

Microsoft’s Take on the Matter

While it is rare for a company to step into a legal debate (corporate principles tend to preclude any sort of comment on pending litigation other than the “without merit excuse”), Microsoft chief executive Satya Nadella does believe that the deal may still have a chance.

As far back as September, Nadella noted that Sony is still the top player in the traditional console market and estimated that Xbox may be a fourth or fifth tier overall. “So if this is about competition, let us have competition,” Nadella said at the time.

And just this week, this stance was further corroborated. Per Thurrot.com, “The fact that Xbox’s dominant competitor has thus far refused to accept Xbox’s proposal does not justify blocking a transaction that will benefit consumers. Giving consumers high-quality content in more ways and at lower prices is what the antitrust laws are supposed to promote, not prevent.”

Xbox officials also noted that any such removal of content from outside platform consideration made “no financial sense” given the established prevalence, adding that “The reputational hit to Xbox would not be worth any theoretical economic benefit from taking Call of Duty away from competitors.”

Over at Activision Blizzard, chief executive Bobby Kotick is himself unconvinced. “There is no sensible, legitimate reason for our transaction to be prevented from closing,” Kotick stated, adding that he firmly believes that eventually, the two companies “will prevail on the merits of the case.”

And Microsoft Vice Chair and President Brad Smith also believe that the deal has a chance even in the face of these complaints, going so far as to offer a nuanced chance for negotiations and stating that “Even with confidence in our case, we remain committed to creative solutions with regulators that will protect competition, consumers, and workers in the tech sector.”

Our Take

Given the legitimate concerns that Xbox platforms could become the de facto home of games like Candy Crush, Overwatch 2, Call of Duty, and Crash Bandicoot, it’s safe to assume that the legal back and forth over the deal is unlikely to end anytime soon, and may still potentially cause a total collapse of the deal itself.

It’s also important to note that Microsoft has been in this position before – regulators famously came close to shattering the company at its core over the Internet Explorer distribution debate – so there’s a possibility that remediation would cause a similar stripping away of Xbox as a possible condition if the deal is salvageable, if not a “beyond the box” strategy requirement that frees up certain games like Call of Duty for other devices or through a mandate that Game Pass be ported to other consoles through means such as cloud gaming.

This has already been seen to large extents by the fact that Mojang remains free to distribute Minecraft games on other platforms despite being an Xbox studio, so it’s not out of the question for a similar deal to be worked out for Activision Blizzard games if regulators and corporate executives do eventually come to terms as such.

But for a vocal group of gamers to take matters into their own hands represents a sizable shift in the debate over whether or not the merger is even a good idea, to begin with. And this is one development in the matter that demands close attention to its result.