Microsoft intends to defend itself in the Federal Trade Commission's (FTC) decision to halt its $75 billion bid for Activision Blizzard. The company is likely to use its status as an industry underdog as an argument, The Wall Street Journal (WSJ) reported.
Microsoft's Defense
Microsoft has said for months that the purchase would not endanger industry competition since it is behind competitors in video game consoles and mobile-game developers.
The corporation also expects cloud gaming to increase competition in the market.
Legal experts believe Microsoft would likely base its argument on these talking points and the fact that it is seeking a vertical merger, which means it is purchasing a firm in its supply chain rather than a direct rival.
According to Microsoft's president and vice chair, Brad Smith, the acquisition is excellent for gamers, customers, game creators, and competition. "We will have to present this case to a judge in a court because this is a case in which I have great confidence."
After the FTC's lawsuit was filed on Dec. 8 in the agency's administrative court, Microsoft had until this past Thursday, Dec. 22, to submit a response.
FTC's Claim
The FTC said the acquisition is "illegal" as it would give Microsoft control over how customers access Activision's games outside its own Xbox platforms and subscription services.
The firm could increase costs or degrade Activision's content for those who do not utilize its gear, the FTC warned.
An agency official explained last month that any company that owns Activision Blizzard's content might impede the competition.
Microsoft's Smith contested the FTC's concern that its biggest competitor, PlayStation maker Sony, would be disadvantaged by the acquisition. He claimed Sony's high-performance console dominance was too huge to defend.
Smith added that the FTC's complaint depends on a fear that Microsoft may make Activision's Call of Duty exclusive to its Xbox system. But apparently, Sony has four times as many exclusive titles as Microsoft, he said.
Microsoft made a last-minute promise to keep "Call of Duty" games accessible via a legally valid consent decree, adding to a previous commitment to make it accessible for at least ten years.
Legal Matters
Unless a settlement is achieved before August, an administrative court hearing is scheduled.
After the case is heard, a ruling might take months, and the losing party can appeal to the whole commission. Upon appeal, the commission considers the entire record and hears oral arguments before upholding or overturning the administrative law judge's ruling.
In case Microsoft loses, it may appeal to a federal appeals court.
A Columbia Law School professor, Eric Talley, said this is no easy case for the FTC. Even if the chances are high, they are prepared to try to change legal precedents.
Some experts say Microsoft should withdraw the $68.7 billion deal to avoid CEO distraction and costly regulatory compromises. Nevertheless, Microsoft vows to resolve regulators' concerns.
