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Final Part
More generally, to carry its burden as to the content-library and cloud-gaming "markets," the FTC must prove that al of the following claims are likely true. In fact, none is true. (Page 21)
First, the FTC must prove that, but for this merger, Activision would allow COD to be included in third-party content-library or cloud-gaming services. REDACTED (5 sentences). This merger could only increase access to COD on these services, to the benefit of consumers—as cloud provider Nvidia agrees. (Page 22)
Second, the FTC must then prove that the post-merger combined company would likely withhold COD from subscription and cloud gaming services. Again, however, the FTC does not even try to make that showing, nor could it—particularly in light of the binding contracts Microsoft has already struck with Nvidia and other cloud providers. (Page 22)
Third, the FTC must additionally prove that any post-merger withholding would substantially lessen competition. It cannot do so because exclusivity arrangements are ubiquitous; Sony and Nintendo already use them more than Microsoft does; and, as discussed above, they raise no competitive concerns except in narrow circumstances involving substantial market power and large foreclosure percentages, neither of which is present here. (Page 22)
Fourth, as to the cloud-gaming "market," the FTC must prove that cloud gaming will develop in the near-to-intermediate term as a genuine alternative to consoles or performance PCs, in particular for multi-player, fast-twitch, graphics-intensive games such as COD. REDACTED (two sentences). The FTC can show no such thing. As Sony admits, network engineers are nowhere close to solving the immense technological challenges presented by that cloud game-play model, which is one of the reasons why Activision refuses to make COD available for cloud gaming. And there is no basis for blocking a merger based on speculation about harm to non-existent markets that are unlikely to materialize anytime in the foreseeable future. (Page 22)
Fifth, if the FTC could establish that a cloud-gaming market will develop, it would also have to show that Xbox will be a major player in it; otherwise, it would have no cloud-gaming business to promote through exclusivity arrangements. The FTC cannot substantiate that speculation either. REDACTED (6 sentences) (Page 22)
The FTC's failure to demonstrate a likelihood of ultimate success means there is no reason to consider the equities. But in any event, the equities—both public and private—weigh against granting the "extraordinary and drastic remedy" the agency requests. (Page 23)
As a threshold matter, Microsoft's merger with Activision does not implicate the "principal" "public equity consideration [that Congress had] in mind when it enacted section 13(b)"—namely, the need to maintain the pre-merger "status quo" so the FTC can award effective relief if it succeeds on the merits. This consideration applies chiefly in the context of horizontal mergers where two competing companies integrate their operations and, in the process, often eliminate stores, factories, or other redundant assets, making it difficult to unscramble the merger. (Page 23)
Microsoft's vertical merger with Activision, however, raises none of these concerns. Microsoft and Activision are not competitors in the relevant markets alleged. And Microsoft intends to operate Activision similar to other recent acquisitions, such as Minecraft developer Mojang. In other words, Activision's creative operations will remain separate and continue to run as they did pre-merger. Consequently, even in the (unlikely) event the FTC continues to press its Part 3 case and then succeeds on the ultimate merits in that proceeding, the agency can order Microsoft's divesture of Activision—"an effective ultimate remedy". As a result, the "principal public equity" cuts against the government. (Page 23)
In addition, granting a preliminary injunction would kill the deal, robbing consumers of the "beneficial economic effects and procompetitive advantages" resulting from this merger, including increased availability of Activision content. By contrast, there is no risk that consumers would be injured while the administrative process runs its course—Sony's existing contract for COD runs through 2024 and it has an offer for much longer access. (Page 24)
Exhibits and content
Coming soon
Remedies offered and approved by the EC
Coming soon
