Microsoft’s acquisition of Activision Blizzard will be subject to antitrust review by the (new) FTC

The Federal Trade Commission is taking up the antitrust review of Microsoft’s acquisition of Activision Blizzard, at a time when the U.S. agency is pushing for a more aggressive enforcement policy towards the new technology industry.

A few days ago, Microsoft announced its intention to acquire Activision Blizzard for nearly $70 billion. The deal is a historic one, and according to Bloomberg, the FTC (the Federal Trade Commission in the United States) has just taken up the matter to assess whether it complies with U.S. antitrust laws – and the FTC has the power to block the deal.

An aggressive control policy

Microsoft - Activision BlizzardThis FTC referral comes in a particular climate: the gaming industry and the new technologies industry in general (the GAFAM industry) occupy an increasingly dominant place in our lives, and the sector is further strengthening its positions by multiplying acquisitions. The tech industry is therefore increasingly concentrated and in the United States, the Biden administration sees this as a threat to both consumers and the sector.

This is why the FTC, now under the authority of Chairwoman Lina Khan appointed by Joe Biden, is pursuing a much more aggressive control policy than in recent years – the FTC recently blocked the acquisition of Arm Ltd by Nvidia or of Aerojet Rocketdyne by Lockheed Martin Corp.

A risk of blocking the Microsoft / Activision Blizzard deal?

Could the acquisition of Activision Blizzard by Microsoft be blocked by the FTC? Time will tell, but the Commission must assess whether the combination of hardware (Microsoft’s consoles) and software (Activision Blizzard’s games) in the same hands is likely to distort competition.FTC-1

And Lina Khan’s FTC now has an extensive vision of the notion of competition: it fights not only against monopolies (harmful to consumers who no longer have a choice of available products) but also against monopsony – those markets not dominated by a dominant seller, but characterized by a dominant buyer. In other words, if the acquisition of Activision Blizzard’s catalog leads Microsoft to stop seeking out other game licenses from non-Microsoft developers, the FTC could see this as a dominant position harmful to the gaming industry. The deal could then be blocked totally (no deal) or partially (Microsoft could be forced to give up part of Activision Blizzard or certain licenses, for example).

At this stage, we don’t know how the FTC will read the deal, but we do know that Microsoft is subject to a $3 billion forfeiture clause if the deal doesn’t go through. We can therefore imagine that the group is rather confident in its chances to validate its acquisition by June 2023.

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