FTC vs. Microsoft: Everything to know about the Xbox-Activision deal

The fate of Microsoft’s bid to buy Activision — one of the first and oldest third-party publishers in console video gaming — now rests in the hands of a single person. The companies and the Federal Trade Commission spent a week in federal court over the latter’s request that a judge put a stop to the deal.

Now that the testimony is over, it’s time to close arguments. Longtime Xbox and PlayStation fans have seen the hard-hitting, fast-paced business of major video game publishers and platform owners since last Thursday. It could be a historic time in the history of video games. What will happen now may also influence how many millions continue to play these games for years.

Here’s what you really need to know about the past week, where matters are headed, and whether this megadeal will go through.

Image: Bethesda Game Studios/Bethesda Softworks

What is the next step in the Microsoft/Activision FTC lawsuit?

The judge in the Federal Trade Commission’s case against Microsoft over its $68.7 billion acquisition of Activision Blizzard is expected to rule before July 18 whether to block the deal. That’s the closing date for the proposed buyout of the publisher of Call of Duty, World of WarcraftOverwatch,.

Federal Trade Commission had already brought a case in December against the merger. This hearing regards the government’s request for a restraining order stopping all merger activity and preventing it from closing. On June 13, Judge Jacqueline Scott Corley temporarily granted this. Her next decision is to decide whether she will make it permanent.

The restraining order would stop the deal until the FTC’s overall lawsuit against the Microsoft-Activision Blizzard deal is resolved.

What will happen if a judge decides in favor of Microsoft or Xbox?

The FTC would find it much more difficult to undo the deal if the purchase went ahead. It would then be up to the FTC to decide if it was worth their time, since a denial of its request would be perceived as a rejection of its case. That case was brought under the FTC’s own administrative law apparatus (an in-house court, basically), so neither Corley nor her judicial district would be involved.

Two other important regulatory bodies, United Kingdom and European Union have already ruled on the Microsoft/Activision merger. The U.K.’s Competition and Markets Authority moved to block it in April; the European Union approved it in May. Although these three bodies all operate independently, two of them agreeing could convince the other to change their mind. Microsoft and Activision may also move their U.K. offices if Corley allows the transaction to go through.

What will happen if a judge decides in favor of the FTC

If the deal doesn’t close, it is likely that Microsoft will abandon it and pay Activision an early termination fee, which could be as high as $3 billion. In addition to that penalty, Microsoft attorney Beth Wilkinson told The New York Times that a suit before the FTC’s in-house court would be a “three-year administrative nightmare” that would tank the deal altogether, regardless of its ruling.

Image: inXile Entertainment/Xbox Game Studios

Which Xbox games will Microsoft exclusive?

In a hearing with Xbox’s chief financial officer Tim Stuart, the FTC released an email sent by Phil Spencer to Xbox Game Studios director Matt Booty on November 20, 2021, in which Phil Spencer declared that ZeniMax would only release PC or Xbox games from now on.

“All games going forward?” Stuart replied. “Not just new IP, but ALL games going forward? Wow.”

So we can pretty much count on the next Elder Scrolls game (which a Microsoft attorney may have let slip is targeted for a 2026 launch) being Xbox- and PC-exclusive, though that hasn’t been explicitly said yet.

Xbox Game Studios is made up of 22 studios. Many of these already produce Xbox exclusive titles such as the Gears of War or Forza Motorsport series. Microsoft purchased several studios in 2018. These included inXile Entertainment’s Wasteland, Ninja Theory’s Hellblade and Obsidian Entertainment.Outer Worlds). inXile’s next game, the action-RPG Clockwork Revolution, Xbox exclusive. So is Obsidian’s next game, AvowedComing next year.

As for Call of Duty, Microsoft’s witnesses and attorneys repeatedly stressed the company’s outreach to Sony Interactive Entertainment with an already-signed agreement to keep Call of Duty on PlayStation, at feature and content parity “for at least several more years.” In September, SIE boss Jim Ryan rejected the offer as “inadequate.” After this, Microsoft offered both Sony and (remarkably) Nintendo 10-year agreements to have Call of Duty at parity on their platforms.

James Weingarten, an attorney for the FTC, pressed Spencer further to make a promise under oath that Call of Duty would remain on PlayStation. Spencer was pressed by Weingarten, who asked him to promise to keep Call of Duty on PlayStation platforms, no matter what Sony wanted. Corley, however, said that Weingarten should move onto other questions.

Infinity Ward/Activision

Who’s going to win in Microsoft vs. the FTC?

Observers, analysts, pundits, and the like have had a great time over the past week stacking up the claims and counterclaims made, and guessing at the general disposition of Corley to what she’s heard. This is not an issue for a jury. She alone will decide.

Microsoft’s purchase of Activision is harming the market. The FTC has concentrated almost solely on console exclusivities. FTC attorneys have focused on Call of Duty and the potential harm that would occur if PlayStation users lost their access.

In this regard, the government has made some strong statements when it revealed that Microsoft (owners of Bethesda Softworks), purchased ZeniMax Media because it fears StarfieldThe launch of this game in September would make it a PlayStation-exclusive. Instead, Starfield Xbox One and PC are exclusives.

Ryan’s emails and testimony on record from Sony Interactive Entertainment President Ryan would seem to contradict that statement. Ryan said he did not view the exclusivity of Bethesda’s Redfall Or even Starfield It is anti-competitive. Additionally, Ryan said in an email to a colleague, “We’ll be more than OK.” He said, after discussions with Spencer and Activision boss Bobby Kotick, “I’m pretty sure we will continue to see COD on PlayStation for many years.”

Corley appeared at times, during her closing arguments to be flummoxing the FTC’s lawyers. Corley noted data from Microsoft’s expert witness, economist Elizabeth Bailey (who appeared under stipulation from both sides), showing that 62% of PlayStation owners do not play Call of Duty at all. She also chided Weingarten with a reminder that “it’s not the harm to Sony we care about — it’s the harm to consumers.” Microsoft and Activision representatives have made this a talking point over the past several months.

“All this for a shooter video game?” Corley said later. “We’re concerned about competition for this one shooter video game?”