Microsoft Rallies Against FTC on ActiBlizzard Dispute, Says Procedures Violate 5th Amendment Due Process Right

Alessio Palumbo
Microsoft Activision Blizzard

Microsoft has responded in kind to the US Federal Trade Commission's antitrust lawsuit, where the FTC is trying to block the $68.7 billion acquisition of Activision Blizzard announced in January 2022.

The full response drafted by Microsoft lawyers was released by CNBC. Over its 37 pages, the Xbox company goes as far as claiming that the FTC's proceedings are essentially in violation of the Constitution of the United States of America. Here's an excerpt from the final section titled Affirmative and Other Defenses.

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The Commission’s procedures violate Microsoft’s right to procedural due process under the Due Process Clause of the Fifth Amendment. The structure of these administrative proceedings, in which the Commission both initiates and finally adjudicates the Complaint against Microsoft, violates Microsoft’s Fifth Amendment Due Process right to adjudication before a neutral arbiter.

These administrative proceedings violate Microsoft’s Fifth Amendment Due Process right to adjudication before a neutral arbiter as applied to Microsoft because the Commission has prejudged the merits of the instant action.

Of course, Microsoft lawyers also made much more specific counters to the FTC's allegations. For instance, they argued that the purchase of ZeniMax and the subsequent decision to make Starfield and Redfall exclusive to Xbox and PC has no relevance to the Activision Blizzard dispute because both games (and a third unnamed one, also due to be exclusive) will be played alone or by small groups.

On the other hand, Microsoft continued to allow ZeniMax subsidiary Bethesda to support multiplayer games like Fallout 76 and The Elder Scrolls Online on a broad range of platforms. Microsoft purports that Call of Duty falls within the same spectrum of a predominantly multiplayer game that is meant to be played by large communities. As such, Microsoft would have no interest in removing Call of Duty from PlayStation; should there be any lingering doubt, Xbox’s offer to put Call of Duty on other platforms on commercially favorable terms for those platforms should eliminate it, says Microsoft.

The response also addresses the FTC's claim that Microsoft had somehow lied to the European Commission about the ZeniMax acquisition.

Any suggestion that Microsoft’s statements to the European Commission about ZeniMax were misleading is incorrect. Microsoft explicitly said it would honor Sony’s existing exclusivity rights and approach exclusivity for future game titles on a case-by-case basis, which is exactly what it has done. The European Commission agrees it was not misled, stating publicly the day after the Complaint that Microsoft did not make any “commitments” to the European Commission, nor did the European Commission “rely on any statements made by Microsoft about the future distribution strategy concerning ZeniMax’s games.” Instead, the European Commission cleared the transaction “unconditionally as it concluded that the transaction would not raise competition concerns.”

Microsoft says the FTC's complaint should be denied as the Commission cannot demonstrate how the transaction would leave consumers worse off since they would be able to access Activision's games in new and more affordable ways (namely, Game Pass). Lastly, there's also a straight jab at Sony, which has tried to oppose the deal every step of the way.

Sony may prefer to protect the revenues it gets from more expensive individual game sales, but the antitrust laws do not serve to insulate the dominant market player and its favored business model from competition. 

In related news, the UK's Competition and Markets Authority (CMA) publicly shared the responses received from the public. Over 2100 emails were sent to the CMA, of which roughly three-quarters favored the deal's closure. The CMA is still undergoing the second phase of its investigation on the Microsoft/Activision Blizzard deal.

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