The Federal Trade Commission on Thursday sued to block big deals by Microsoft and Meta in two major government vs. big tech showdowns.
- The FTC moved to try to block Microsoft’s planned $69 billion takeover of video game company Activision Blizzard, saying it could suppress competitors to Microsoft’s Xbox game console and its growing games subscription business.
- Federal regulators also opened their campaign to block Facebook parent Meta’s acquisition of a virtual-reality company Thursday in a San Jose, California, courtroom.
Meta showdown
In a landmark legal challenge to a Big Tech merger, the FTC sued to prevent Meta’s acquisition of Within Unlimited and its fitness app Supernatural, asserting it would hurt competition and violate antitrust laws.
The FTC is arguing that, were it not for the Within acquisition, Meta would have developed its own dedicated VR fitness up, entering this nascent market with its own product as a new competitor — and Within would have remained in independent player in the market.
Regulators cite a 2015 email from Facebook CEO Mark Zuckerberg to Facebook executives saying that his vision for “the next wave of computing” — namely virtual and augmented reality — was control of apps as well as the platform on which those apps are distributed. The email said that a key part of this strategy is for the company to be “completely ubiquitous in killer apps,” which are apps that prove the value of the technology.
“Meta could have used “all its vast resources and capabilities” to build its own VR fitness app, said FTC lawyer Abby Dennis. Instead, she added, when Meta heard a rumor that Within was being pursued by Apple, it decided instead “to just acquire the market leader” in the space.
Meta lawyer Mark Hansen, disputed the FTC’s claim that the company was going to build its own app.
“There will be no evidence that Meta was ready” do do anything, he said.
Microsoft will allow ‘Call of Duty’ on Nintendo if its $69B Activision deal wins OK
Microsoft case
The FTC’s challenge could be a test case for President Joe Biden’s mandate to scrutinize big tech mergers. The commission voted 3-1 to issue the complaint after a closed-door meeting, with the three Democratic commissioners voting in favor and the sole Republican voting against.
The complaint points to Microsoft’s previous game acquisitions, especially of well-known developer Bethesda Softworks and its parent company ZeniMax, as an example of where Microsoft is making some upcoming game titles exclusive to Xbox despite assuring European regulators it had no intention to do so.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said a prepared statement from Holly Vedova, director of the FTC’s Bureau of Competition. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”
The FTC said it was filing the complaint through its administrative process rather than taking the case to a federal court. An administrative law judge it set to hear evidence but not until August 2023, according to the complaint.
Microsoft’s president, Brad Smith, signaled in a statement Thursday that the company is likely to challenge the FTC’s action.
“While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court,” Smith said.
The company had been ramping up its public defense of the deal in recent days as it awaited a decision. Smith said Microsoft has been committed to addressing competition concerns and brought proposed concessions to the FTC earlier this week.
“We continue to believe that this deal will expand competition and create more opportunities for gamers and game developers,” Smith said.
Microsoft announced the merger deal in January but has faced months of resistance from Sony, which makes the competing PlayStation console and has raised concerns with antitrust watchdogs around the world about losing access to popular Activision Blizzard game franchises such as the military shooter game Call of Duty.
Antitrust regulators under Biden “have staked out the view that for decades merger policy has been too weak and they’ve said, repeatedly, ‘We’re changing that,’” said William Kovacic, a former chair of the FTC.
That has put pressure on the FTC to fulfill its bold promises to “not allow dodgy deals and not accept weak settlements,” said Kovacic, who was a Republican commissioner appointed in 2006 by then-President George W. Bush. But he said Microsoft has a good chance of winning its legal challenge.
“It’s evident that the company has been making a number of concessions,” he said. “Microsoft would likely raise them in court and say the FTC is being incorrigibly stubborn about this.”
Microsoft announced its latest promise Wednesday, saying it would make Call of Duty available on Nintendo devices for 10 years should its acquisition go through. It has said it tried to offer the same commitment to Sony.
