Explained | Why is Microsoft’s acquisition of Call of Duty-creator under the FTC scanner?

The Federal Trade Commission has argued the acquisition might result in anti-competitive practices that “would enable Microsoft to suppress competitors to its Xbox gaming and its rapidly growing subscription content and cloud-gaming business.” 

The story so far: The United States’ Federal Trade Commission (FTC) has sought to block Microsoft’s $69 billion deal to acquire Call of Duty-developer Activision Blizzard, alleging anti-competitive practices that “would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.”

The FTC is planning to file a lawsuit to block the merger, and the arguments will be heard in a courtroom. In its complaint, the commission made a note of Microsoft’s past actions— it has withheld gaming content from its rivals by making it exclusive to its platforms. “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,” said Holly Vedova, Director of the FTC’s Bureau of Competition. 

The deal is the largest ever purchase by Microsoft; also, it is the largest ever in the video gaming industry. The acquisition, should it go through, would strengthen Microsoft’s Gaming segment with the inclusion of Activision Blizzard titles such as Call of Duty, Warcraft, Diablo, Overwatch and Candy Crush, among others. 

Moreover, the deal endeavours to strengthen Microsoft’s gaming portfolio, converting Activision Blizzard’s 400 million active monthly users based in 190 countries to bolster its video gaming subscription service ‘Xbox Game Pass’ — which attained a milestone of over 25 million subscribers earlier this year. The Xbox Game Pass entails customers paying a monthly fee to access a library of first and third-party video games for a console or personal computer. 

Microsoft also seeks to more strongly approach the consumer metaverse by “intersecting global communities rooted in strong franchises”.  

In a separate context, S&P Global quoted CFRA Research’s John Freeman as saying that Microsoft is interested in the value of Call of Duty users who are playing against each other in real time. “Hundreds of millions of active players; that’s a nice asset that Microsoft could most definitely monetise,” he stated, adding, “ Call of Duty is a very narrowly defined metaverse that Microsoft could expand out.” 

FTC recognises that Microsoft and PlayStation-creator Sony control the market for high-performance video game consoles. “The number of independent companies capable of developing standout video games for those consoles has contracted, with only a small group of firms commanding that space today,” it notes.