In January, Microsoft announced its acquisition of Activision Blizzard. The $70 billion USD deal is scheduled to be completed by 2023, and shook the gaming world with figures from every corner expressing opinions on matters like potentially Xbox-exclusive Activision games. Business transactions of this size will inevitably be scrutinized by government actors, and some US politicians are looking at the deal with skepticism.
Senators Bernie Sanders and Elizabeth Warren are among the most prominent voices in Congress speaking about Activision Blizzard's acquisition by Microsoft. Sanders is a lifelong socialist who has always been wary of corporate power in America, and Warren is most well known for her opposition to corporate consolidation, calling for the big banks to be broken up after the 2008 recession. However, this acquisition goes beyond political positions, raising a lot of questions concerning antitrust, securities, and insider trading.
Business Woes at Activision Blizzard
In early March, the Wall Street Journal reported that the US Securities and Exchange Commission (SEC) was investigating three Activision Blizzard investors suspected of insider trading after they bought $108 million of ATVI stock just before the acquisition was announced. It's a criminal offense often prosecuted as a felony, punishable with up to 20 years behind bars and millions of dollars in fines.
The investor problems don't stop there; several Activision Blizzard shareholders have sued the company to stop Microsoft's acquisition. The lawsuit claims there is a major conflict of interest on the part of the company's board of directors, who are looking to reap immediate benefits from the deal by going against the best interest of other shareholders. The suit also claims that Activision Blizzard violated the Securities and Exchange Act by failing to disclose some key information in its submission to the SEC.
Bernie Sanders' Concerns About Microsoft and Activision Blizzard
Sanders, along with other Democratic Congressmen like Warren and Chair of the House Judiciary Committee Jerry Nadler, promised to closely scrutinize the Activision Blizzard takeover. Their biggest issues lie with whether this acquisition follows antitrust laws, which aim to stop anticompetitive practices ranging from corporate consolidation to monopolies. Competition should theoretically incentivize companies to innovate or to keep prices low, and antitrust advocates are worried about Microsoft becoming too big to fail.
Certain business practices can be anticompetitive without necessarily being outright illegal. While some have called this acquisition another push in Microsoft's attempt to become the "Netflix of gaming" with services like the Xbox Game Pass, the intent behind the deal is more akin to becoming an Amazon of gaming. By offering an affordable subscription for hundreds of titles, politicians like Sanders and Warren fear that Microsoft could potentially run its competitors out of business. Sanders often lambasts Amazon for similar practices in the retail and e-commerce markets.
The Video Game Industry is Unique
Despite concerns from politicians, Microsoft executive chairman Satya Nadella is not worried. Antitrust advocates hope the Federal Trade Commission (FTC) will investigate this acquisition and rule against it, but Nadella is confident that the FTC will greenlight the acquisition. Even with this buyout, Microsoft would still only be the third-largest player in the video game market behind Sony and Tencent. Moreover, the video game industry distinguishes itself from other industries like banking or pharmaceuticals thanks to the presence of indie developers, which make it less at-risk of a monopoly ever forming.
Legal precedent in similar scenarios also suggest that the deal will go through. US courts have historically been unwilling to enforce antitrust laws against vertical transactions; the joining of companies that perform different functions. Activision Blizzard, with revenue in excess of $8 billion in 2020, is certainly a major video game publisher. However, Microsoft - which posted more than $143 billion in revenue over the same period - is one of the world’s largest tech multinationals that plays in the realms of software, hardware, consumer electronics, and more. In terms of scale there is no comparison between the two, and short of a political intervention, this acquisition should go through.