Microsoft filed its response to the FTC’s lawsuit and accused the FTC of unconstitutional behavior for, among other things, violating Microsoft’s Fifth Amendment rights to a neutral arbitrator, since the Commission is responsible for initiating the complaint. The response also accuses the FTC of violating Article 3 of the U.S. Constitution by having an administrative judge – a member of the executive branch – involved in proceedings. Their role in the case is collecting information, among other activities authorized by a separate section of U.S. legal code that approves the appointment of administrative judges in the executive branch to carry out these same activities.
Elsewhere in the 37-page-long response, Microsoft denied the claims that the Xbox maker’s $69 million acquisition of Activision Blizzard will stymie competition in the games sector. The response frames the deal as beneficial for Activision Blizzard and consumers alike by offering more people the chance to play Activision Blizzard’s games and at lower prices. It also refuted allegations that the deal would hamper growth in any sector of the games industry, as Microsoft says the FTC has no supporting evidence to suggest there would be any harm to competition after the deal closes.
“The acquisition of a single game by the third-place console manufacturer cannot upend a highly competitive industry,” Microsoft said in its response. “That is particularly so when the manufacturer has made clear it will not withhold the game. The fact that Xbox’s dominant competitor [emphasis in the original] has thus far refused to accept Xbox’s proposal does not justify blocking a transaction that will benefit consumers.”
“Even with confidence in our case, we remain committed to creative solutions with regulators that will protect competition, consumers, and workers in the tech sector,” Microsoft vice president Brad Smith said in a separate statement provided to GLHF.
While Smith narrowed the focus to Call of Duty and the console market, Microsoft’s response suggests the primary reason for purchasing Activision Blizzard is to gain a foothold in the mobile market, presumably thanks to Call of Duty Warzone Mobile and the lucrative portfolio of Activision subsidiary King, makers of Candy Crush Saga. Providing more players access to games was a secondary reason.
Activision Blizzard CEO Bobby Kotick also made a statement, echoing Microsoft’s official response and says many more avenues to compete with Xbox are open to all developers and publishers.
“Our industry has enormous competition and few barriers to entry,” Kotick said. “We have seen more devices than ever before enabling players a wide range of choices to play games. Engines and tools are freely available to developers large and small. The breadth of distribution options for games has never been more widespread.”
Microsoft’s response also alleges that Xbox’s success in the cloud and subscription sectors – which generates several billion dollars in revenue and is built on Xbox’s network of studios and deals with other game publishers – would have no bearing on competitors developing their own services.
Neither executive commented on the FTC’s additional concerns about effects on the games industry’s burgeoning labor movement, nor did Microsoft’s response address it directly.
Meanwhile, the FTC successfully wrapped up a case against Epic Games, where the Commission accused the Fortnite maker of unethical practices targeting children. 10 gamers also sued Microsoft to stop the Activision Blizzard deal from proceeding, though Microsoft didn’t address that case.
Written by Josh Broadwell on behalf of GLHF
