• In the FTC's lawsuit, filed on Dec. 8, the regulator alleged the acquisition would give the Xbox maker the ability to restrict how customers access Activision's games outside of its own platforms.
  • In its complaint, the FTC claimed that Microsoft could increase costs, lower the quality of Activision's content, or even completely block access to the games for those who don't use its technology.
  • The Bill Gates-founded tech giant argued in opposition to the FTC that the acquisition wouldn't threaten industry competition since it lags behind rivals in videogame consoles, particularly Sony Group Corp.'s
  • PlayStation, and has a small footprint in mobile game production. Microsoft has also stated that it anticipates the sector to become more competitive in the future as cloud gaming becomes popular.
  • Some legal experts, according to the Wall Street Journal, said Microsoft will probably base its defense on the aforementioned talking points as well as the fact that it is pursuing a vertical merger, which means it is purchasing a company in its supply chain as opposed to a direct rival.
  • Microsoft has until Dec. 22 to respond to the FTC's complaint.
Why It Matters
  • The FTC may find it challenging to win the case, as courts have historically not viewed deals between businesses that specialize in various stages of the same industry's production process — so-called vertical mergers — as posing a threat to competition, Eric Talley, a professor at Columbia Law School, told WSJ.
  • “It may require the commission to convince a judge to change the law somewhat,” Talley said. “That makes it a difficult case for the FTC to win, though they presumably knew this going in.”

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