ABOUT THE CASE

On January 18, 2022, Microsoft Corporation announced plans to acquire Activision Blizzard, Inc. Microsoft agreed to pay $68.7 billion in an all-cash transaction. Under the proposed merger terms, Microsoft would acquire all outstanding stock of Activision. Upon the deal’s completion, Microsoft would wholly own Activision.

If this acquisition is allowed to proceed, it would be one of the largest mergers of technology companies ever. The proposed acquisition presents both horizontal and vertical aspects: 

  • Horizontal: Microsoft and Activision are two of the largest gaming corporations in the United States, with significant market share in the electronic-gaming markets for developing and publishing video games for purchase by consumers. They directly compete in game development, with both striving to make the most popular and commercially successful games. 
  • Vertical: Microsoft also has a massive electronic-gaming ecosystem, in which it controls a large market share at each level in the electronic gaming supply chain. This includes video game publishing and distribution, along with the manufacturing of video game platforms. It owns and sells the Xbox gaming console and Windows operating system, two of the primary platforms on which games are played. The development and publishing of video games for these and other platforms are critical inputs to the popularity and continued viability of gaming platforms, as well as new gaming platforms and distribution methods, such as cloud-based gaming.

If Microsoft’s proposed acquisition of Activision is allowed to proceed, the electronic-gaming industry will lose substantial competition. Also, Microsoft will have far-outsized market power to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition. Microsoft has announced that it will make concessions with its competitors to allow Activision games on other platforms, but critics and regulating agencies remain skeptical, especially in light of Microsoft’s prior conduct in making games exclusive after acquiring them. 


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CASE FILING AND UPDATES

On December 20, 2022, the firm filed a lawsuit on behalf of several individual electronic-gaming consumers against Microsoft in the United States District Court for the Northern District of California. In DeMartini et al. v. Microsoft Corporation, plaintiffs seek an order from the Court prohibiting the proposed acquisition of Activision by Microsoft as a violation of Section 7 of the Clayton Antitrust Act (15 U.S.C. § 18) in that the merger will have the effect of substantially lessening competition and will tend to create a monopoly in the electronic-gaming industry.


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