Activision Tells Employees FTC Claims Are 'Factually Weak and Legally a Stretch'
Activision Blizzard communications officer Lulu Meservey called the U.S. Federal Trade Commission’s argument “factually weak and legally a stretch” in comments made to employees on Wednesday.
Meservey’s internal messages came just before Microsoft sat in court , defending its $69 billion deal to buy Activision Blizzard in the United States. The trial has been of high public interest, as consumers want to know how this affects their favorite games and gaming industry secrets that are usually held close to the vest will be made publicly available in documents posted online and entered into evidence.
“Like we’ve always said, the facts are on our side, and the FTC’s claims are factually weak and legally a stretch,” Meservey wrote in a Slack message to employees, viewed by IGN. She said she welcomed the FTC’s efforts to block Microsoft’s merger with Activision by filing suit in court. She called the San Francisco judge “efficient” and the hearing “speedy.”
Her message continued by noting that the Microsoft-Activision deal has been approved in 40 countries, including the EU and China. “We’re glad these regulators have put aside political/ideological agendas and focused solely on the facts and the law,” Meservey wrote.
See the full message below (click on the image for a larger version).
Employees were restricted from posting responses in the Slack channel but they reacted to her message with dozens of prayer emojis and Microsoft logo emojis. Activision Blizzard declined to comment.
Meservey posted again on Slack Thursday evening after the first day of the trial and said, “FTC doesn’t seem to really understand our industry (for example, they’re stuck on this idea that we would cut off COD from the leading console or make an intentionally worse version). Even Jim Ryan (of Sony) said he was ‘pretty sure’ our games would remain on PlayStation.”
Lee Hepner, legal counsel at anti-monopoly advocacy group the American Economic Liberties Project, said in a phone call that public opinion could affect the trial and called Meservey’s comments “spin.”
“The people who want to see this deal go through, irrespective of its harm to consumers, are going to try to spin the case to their advantage and make it seem like the FTC doesn’t have a strong case,” Hepner said. “That’s been from parties who want the deal to go forward. It’s not the facts of the case. Yesterday, what you saw is that Microsoft has the ability and they have the incentive to foreclose access to Activision games on competing consoles.”
Hepner pointed to Xbox head Matt Booty having emailed Xbox’s chief financial officer in the past and saying that Xbox’s exclusive content shouldn’t be placed on rival services and the company should “create a moat that nobody else can attack.”
“Microsoft says they wouldn’t make games exclusive to Xbox. But this is evidence that they have taken that exact approach before,” Hepner said. “They want to build a ‘moat’ around their console, which is antitrust slang for boxing out competitors. This is essentially the bulk of the FTC’s case in one email.”
Microsoft was originally seeking to buy Activision Blizzard and complete the merger this month, but the FTC sued to block the deal in December. This week in San Francisco court, Judge Jacqueline Scott Corley shared that she had heard of Candy Crush, and that she likely had a copy of Call of Duty at home laying around. Xbox executives including CEO Phil Spencer have taken the stand to defend the deal. The hearing is slated to continue next week, and most analysts said it’s tough to predict which way the judge is leaning.
“ "The track record of the FTC winning in court isn’t great.
Microsoft shared a statement on the first hearing day, but only addressed its exchange with Sony , rather than specific details about the FTC’s claims: “Today showed Sony has known all along we’ll stand by our promise to keep games on its platform and made clear its work to lobby against the deal is only to protect its dominant position in the market.”
Analysts IGN spoke to were divided on whether the deal could still pass in the United States and the United Kingdom, where it is blocked.
Some still believe the deal will close, with some heavy delays. Microsoft has appealed the U.K. decision, which could take months to move forward. One analyst estimated it could take over nine months to hear the case, and Microsoft will need to show that the U.K. antitrust regulator acted irrationally, illegally, or in violation of procedure.
“The deal will close as planned barring a few stipulations around the U.K. market,” said Joost van Dreunen, a lecturer on the business of games at the NYU Stern School of Business.
Florian Mueller, a developer and consultant who works with Microsoft and previously had ties to Activision Blizzard, said he thinks that the deal could close this year “but obviously can't rule out that some of the processes might still be underway in 2024.”
Jefferies analyst Andrew Uerkwitz agreed that the timeline could be slowed: “The track record of the FTC winning in court isn’t great so we expect this to be a time hurdle and not much else,” he said.
What if it doesn’t pass and Microsoft has an extra $69 billion in cash for other deals? Some analysts said that if the deal stays blocked, it could indicate an environment of regulatory scrutiny that could potentially stop other deals from happening. Other experts were willing to speculate about other companies Microsoft could buy.
Van Dreunen hypothesized that if the deal falls through and Microsoft is stuck with a bag of cash, it has plenty of options, though he said that acquiring Activision would be the strongest move.
“The market softening in the wake of the pandemic has lowered valuations for many, including EA, Take-Two, Ubisoft, and CD Projekt Red, all of which have valuable intellectual property that would bolster Microsoft’s first-party offering.”
Last year, analysts were enthusiastic about the chances of large, splashy gaming acquisitions. Though the regulatory landscape has dulled these ambitions, experts still point to plenty of companies ripe for the purchase.
Cassia Curran, founder of games business consulting firm Curran Games Agency, said the additional cash could give Microsoft an opportunity to buy up rival game companies.
“I'm hoping that Microsoft would spend its $69 billion in securing other content from game developers for Xbox Game Pass — I'm sure they would use at least some of the capital for that,” Curran said. “Perhaps they would make a big mobile games company acquisition as well, if they can't obtain [Candy Crush developer] King.”
For more on the Xbox FTC trial, check out our analysis of how the FTC went on the attack against Bethesda, as well as our round-up of day-one coverage.
Thumbnail credit: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images
Source: IGN
