SAN FRANCISCO – (AP) – Microsoft CEO Satya Nadella is in court Wednesday to defend the company’s $69 billion bid for video game maker Activision Blizzard against federal regulators’ attempts to block the deal.
Nadella and Activision Blizzard CEO Bobby Kotick are both expected to testify before US District Judge Jacqueline Scott Corley on the fourth day of court in San Francisco. That trend could make or break what could be the most expensive event in tech history.
The case represents a major test of the FTC’s oversight of Big Tech led by Chairwoman Lina Khan, who made clear her belief that US regulators were too lenient in past practices that helped increase the power of companies such as Amazon, Google and Facebook. The court battle with Microsoft comes six months after the FTC took Facebook owner Meta Platforms to court in Silicon Valley to try to prevent a takeover of the fitness company from being rejected by a judge in the case.
Microsoft, maker of the Xbox console, has hailed a partnership with Activision Blizzard as a way to make popular Activision games like Call of Duty more accessible. But federal defenders, and Microsoft’s biggest rival in Sony gaming, have argued that it would hurt competition.
The US Federal Trade Commission is trying to persuade Corley to issue a rule that would prevent the seizure from being completed before the administration’s extended hearing begins on Aug. 2 in Washington. Microsoft is fighting to close the deal before the July 18 deadline that would have forced it to pay a $3 billion fine to Activision.
Microsoft entered into the deal 17 months ago in hopes of expanding its video game presence beyond the Xbox, which has half of the market share of former industry leader Sony and its PlayStation console.
The FTC has been fighting to block a deal it fears would allow Microsoft to make popular franchises like Call of Duty and World of Warcraft exclusive to Xbox and the growing online subscription service for the $210 billion worldwide video game industry. the market. The sector is already larger than the video and music industries combined.
The court also heard this week from Sony games chief Jim Ryan, whose testimony was based on video footage.
Written in April, Ryan said he initially had no reservations about the purchase after private discussions with Kotick and Xbox chief Phil Spencer. But Ryan later said he believed Microsoft would leverage Call of Duty’s popularity to the detriment of the PlayStation, especially in the US, where first-person shooters are popular.
“The loss at (Sony) comes from players leaving our platform and moving to Xbox,” said Ryan, CEO of Sony Interactive Entertainment. Even if Microsoft follows through with a promise to keep the game on PlayStation, Ryan said there will still be “some kind of negative experience for PlayStation players.”
Microsoft has criticized the FTC for ignoring pressure that the company’s gaming division should pay a profit that would increase the cost of Activision’s payments and the potential backlash from video game fans with a wide range of opinions if a popular franchise such as Call of Duty is not allowed. from other platforms.
Harvard University economist Robin Lee, an expert hired by the FTC, testified on Tuesday that such refunds could be offset by the “huge economic benefits” Microsoft could gain by blocking competitors’ access to Call of Duty and other popular games, such as allowing Xbox users to access older or better versions of the game.
Lee’s testimony prompted a judge to say Tuesday that “all of the evidence has been about Calling Responsibility in this case,” and asked whether that would distinguish the findings from other sports ads that have been challenged on similar grounds.
“It’s a unicorn in sustainability, in popularity, in numbers,” Corley said. “It’s obvious.”
Microsoft has cited earlier commitments to make Call of Duty available on Nintendo’s Switch console and Nvidia’s game subscription service as evidence that the Activision deal could benefit consumers.
Microsoft also tried to provide evidence that Sony is trying to destroy the contract to maintain its lead in the console market.
Negotiations are expected to conclude on Thursday. Another major regulator, the UK’s Competition and Markets Authority, has also taken steps to prevent a takeover by Microsoft.
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AP technology writer Michael Liedtke contributed to this report.
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