During a hearing held this week at the House of Representatives, FTC Chair Lina Khan was questioned (via DestinLegarie) by Diana Harshbarger, a Republican rep from Tennessee’s first congressional district. Harshbarger asked the FTC Chair why they were siding with Sony, a dominant player in the high-end console market, over Microsoft on the Activision/Blizzard deal. Khan’s response was rather evasive, though.
Harshbarger: I’d say we can all agree that competition law isn’t supposed to protect a dominant player. In light of that, I find it curious that the FTC is taking action to protect Sony, which has 68% of the global market for high-end videogaming consoles, from competition and attempting to block Microsoft’s proposed acquisition of Activision Blizzard. As you know, Sony has been the most vocal opponent of that deal, and remarkably, the FTC has sided with Sony. Can you explain why that seems to be a good idea?
Khan: This case also has been voted out and is in administrative proceedings, so I’ll let the complaint speak for itself. I would say as a general matter, we always really benefit from hearing market participants across the board, including big players, but at the end of the day, we always make our own independent judgments based on the law and the facts.
The US Federal Trade Commission announced in early December its intention to sue to block Microsoft’s $68.7 billion deal to acquire Activision Blizzard, on the grounds that it would allow the company to ‘suppress competitors’ on the consoles, subscription and cloud markets. For their part, Microsoft’s lawyers reacted strongly right away by stating that the procedures violated the Due Process Clause of the Fifth Amendment, though they later softened that stance and retracted the specific claim.
Following a pre-trial hearing that took place in early January, the evidentiary hearing is currently set before the administrative judge at the FTC headquarters on Wesdnesday, August 2nd at 10 AM Eastern Time. However, recent news suggest the situation could turn out favorably for Microsoft very soon. Next week, both the EU and the UK are expected to render their final verdicts on the acquisition. A rumor indicated that the EU will approve it without requiring any significant concessions from Microsoft, and the UK recently reverted their belief that the acquisition would pose a risk to the console market’s competition.
The jury is still out on whether Microsoft can convince them of the same when it comes to the cloud market, but the Xbox company has signed ten-year deals to brings of all its games (including Activision Blizzard’s if the deal goes through) to four different cloud gaming services (GeForce NOW, Boosteroid, Ubitus, and EE) in an attempt to pre-emptively assuage that concern, too. That is an addition to the ten-year deal signed with Nintendo to bring Call of Duty on the Switch platform.
Meanwhile, unconditional approvals have been flowing from countries like Japan (notably, Sony’s home country), South Africa, Chile, Brazil, Serbia, and Saudi Arabia. Should the EU and UK also follow suit, the FTC would likely stand alone in its opposition to the deal, further weakening their already dubious position in a full-fledged court battle. Whether the Federal Trade Commission would press on regardless of the outcome as they’ve sometimes done under Lina Khan or not remains to be seen. Either way, the next few weeks will be extremely intense for the closure of the biggest acquisition ever attempted in the games industry.
