With U.S. antitrust enforcers determined to stop Microsoft (MSFT.O) from buying “Call of Duty” maker Activision Blizzard (ATVI.O), the companies’ two chief executives are expected to testify on Wednesday that the $69 billion deal will be good for gamers and should go forward. The Federal Trade Commission has asked a judge to stop the transaction temporarily to let the agency’s in-house judge decide the case. The hearing is scheduled to start Aug. 2, well past a contractually obligated July 18 deadline for the deal to close.
Microsoft and Activision CEOs Satya Nadella and Bobby Kotick will both give testimony. The companies argue that the Merger will spur competition in the video game industry, challenging Sony’s console market dominance and bolstering Microsoft’s subscription and cloud gaming businesses.
The FTC and the UK’s Competition and Markets Authority, which oversees the gaming industry, have raised concerns that the deal would lead to a too-big-to-fail video game giant with too much market control. The company will be the world’s third-largest video game publisher, behind Sony and Nintendo.
Kotick has defended the deal by saying that the market has been evolving rapidly, including the advent of digital streaming services, which threaten to cut into sales of physical games and hardware like consoles. He also cited the need to invest in new properties to maintain revenue growth and avoid losing out to competitors.
Investors need to be convinced. Shares of Activision are down more than 11% since the deal was announced in February, as investors question whether the acquisition will pay off in the long run. The company has a lot of debt and needs to keep investing in new games to grow profit margins. It also faces a lawsuit from an investor alleging it conspired to slash employee wages.
Both companies have vowed to fight the suit. The FTC’s deputy chief trial counsel James Weingarten has said that evidence will show that Microsoft leadership seeks to own content that could exclude other gaming consoles and may not follow contracts with cloud streaming services to allow game access on those platforms. Microsoft officials have responded that the company would not make Activision titles exclusive to its Xbox console and would continue to offer them on other platforms.
