MS Faces Full-Scale Battle with US FTC Over Blizzard Acquisition Blockade

MS Maintains Position "No Competitive Threat"
Difficult for Both Sides to Find Common Ground

[Asia Economy Reporter Yujin Cho] Microsoft (MS) is preparing to file an appeal against the U.S. regulatory authorities' halt on its acquisition and merger (M&A) of Activision Blizzard. The world's largest software company, MS, announced earlier this year the industry's largest M&A plan to acquire North America's largest game developer Activision Blizzard for $68.7 billion (approximately 82 trillion won at the exchange rate at the time), but the acquisition has become uncertain as it faces an antitrust lawsuit from the U.S. Federal Trade Commission (FTC).

The Wall Street Journal (WSJ) reported on the 17th (local time) that the conflict between the two sides is escalating into a full-scale confrontation as MS refuses to comply with the regulatory authorities' request to prepare a remedy to resolve the antitrust lawsuit and instead moves to file an appeal. WSJ, citing legal experts, said MS is expected to focus on the argument that the acquisition will not threaten industry competition because it is a latecomer in the game distribution market and has a limited position in game development.

Initially, the U.S. media and the FTC viewed that MS's intention behind acquiring Blizzard was to secure game intellectual property (IP) and form a monopoly in the game distribution market based on it. MS, which has enjoyed a monopoly position in the PC market, entered the console game market late in 2001 and adopted an M&A strategy to rapidly increase its market share. Through active M&As, it expanded its size and competitiveness, and by acquiring the gaming giant Blizzard, it was able to stand tall as a major game company alongside China's Tencent and Japan's Sony.

Competitors are wary that MS might abuse its market position by exclusively releasing blockbuster Blizzard games on its game subscription service 'Game Pass' and blocking other game companies from entering platforms like Wii and PlayStation. Wedbush analyst Dan Ives said, "MS's decision to acquire Blizzard was to secure a monopolistic market position," adding, "Giving up that monopolistic position would mean the termination of the acquisition deal," suggesting that it will be difficult for both sides to reach an agreement in this lawsuit.

To secure such a monopolistic position, MS chose to absorb Blizzard through a merger. David Hoff, a lawyer at Gamma Law, an IT and media M&A specialized law firm in San Francisco, said, "The focus of the FTC's lawsuit is that MS is the merging entity absorbing Activision Blizzard into MS," adding, "If it is not a horizontal merger between the two companies, the damage to consumer welfare is obvious, and the key will be whether MS can provide sufficient explanations to resolve the controversy in this regard."

Earlier, on the 8th, the FTC took a strong measure by filing an antitrust lawsuit opposing MS's acquisition of Activision. In the complaint, the FTC argued, "MS could hinder competition in quality, price, and innovation by controlling Activision Blizzard's IP."

It also sees that MS could manipulate the market by leveraging the IP owned by Blizzard. The complaint pointed out MS's past history of blocking and pressuring competitors from supplying games when it acquired ZeniMax Media, proving through this past case that MS would not provide game content to competitors.

The U.S. authorities, who have been aggressive in regulating big tech, have a clear stance. After the inauguration of the Joe Biden administration, the Department of Justice and the FTC divided supervisory authority over big tech and have indicated aggressive law enforcement. Some believe that the FTC, led by Lina Khan, known as the "Grim Reaper of Big Tech," may take ultra-strong measures such as corporate breakup lawsuits and legislation to reduce business scale, as seen in the past case of AT&T's corporate breakup.