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Can Big Tech Get Bigger? Microsoft Presses Governments to Say Yes.

Microsoft’s $69 billion deal for Activision Blizzard, which is undergoing reviews in 16 countries, has become a test for whether tech giants can buy companies amid a backlash.

David McCabe reports on tech policy from Washington, and Karen Weise reports on Microsoft from Seattle.

“If this deal had happened four years ago, this would hardly be of any interest,” Brad Smith, Microsoft’s president, said in an interview. “If one cannot do something easy, then we’ll all know you can’t do something hard.”

At the heart of regulators’ concerns about the Activision deal is whether it violates antitrust laws by giving Microsoft outsize power in the video game industry. They worry that Microsoft could pull Activision’s games away from competitors like Sony or use them to get an unfair leg up as more gaming is streamed online.

Microsoft’s deal for Activision will demonstrate whether tech giants can navigate the new environment, said William E. Kovacic, a former F.T.C. chairman. “It’s a fundamental test,” he said.

The road ahead appears long. Of the 16 governments reviewing the deal, just Saudi Arabia and Brazil have approved it. Microsoft said that it expected Serbia to approve the deal shortly.

In a statement, the Competition and Markets Authority said it would release its findings on the deal in the “new year.” The European Commission said its investigation is “ongoing.” The F.T.C. declined to comment on the deal.

The Activision deal is “substantially more resource-intensive,” Mr. Smith said.

Obtaining approval for the acquisition is critical for Microsoft. Gaming has become its most important consumer business, surpassing $15 billion in annual sales largely under the Xbox brand. The compensation for Satya Nadella, Microsoft’s chief executive, is partly tied to the growth of Game Pass, the company’s Netflix-like subscription service for gaming. And Microsoft agreed to pay Activision as much as $3 billion if the deal fell apart.

Bobby Kotick, Activision’s chief executive, said in an interview that he had a “high degree of confidence that the regulators will be thoughtful about evaluating the industry.” He added, “I have no reason to believe that we won’t ultimately be successful in the transaction.”

Mr. Smith asked lawmakers and government leaders for advice on addressing the labor concerns.

In June, Microsoft hammered out an agreement with the C.W.A., promising not to oppose unionization at Activision. The negotiations involved “more lawyers than a lawyer convention,” Chris Shelton, the union’s president, said in an interview. The concessions turned the union into supporters of the deal.

Last month, Mr. Shelton met with Ms. Khan and praised Microsoft’s commitment to remain neutral in union campaigns and said the deal should be approved.

“The F.T.C. told me, ‘A lot of companies promise lots of things, then they never keep their promises,’” he recalled. He said he told the agency that the agreement was rock solid, and in writing.

A spokesman for the F.T.C. said agency officials had offered no opinions on the deal or the labor agreement in the meeting.

Microsoft has been less successful in neutering opposition from Sony, which makes the PlayStation console. Sony has argued that Microsoft could pull Call of Duty from PlayStation to lure players to Xbox.

Microsoft has denied that it would do that. “The first call Satya and I made after the deal was announced was to the C.E.O. of Sony to say, ‘Hey, we’re going to keep Call of Duty on your platform,’” said Phil Spencer, Microsoft’s gaming chief.

Microsoft accused Sony of misleading the regulator, saying it “overstated the importance of Call of Duty to its viability.”

Mr. Spencer said that “maintaining and growing the existing Call of Duty business is pretty central to the economics of the deal.”

In a statement, Jim Ryan, the chief executive of Sony Interactive Entertainment, said it was “not true” that his company had misled regulators. He said that Microsoft was “a tech giant with a long history of dominating industries” and that “it is highly likely that the choices gamers have today will disappear if this deal goes ahead.”

Microsoft said that on Nov. 11 it offered Sony a 10-year deal to keep Call of Duty on PlayStation. Sony declined to comment on the offer.

Last month, Mr. Spencer and other Microsoft executives brought an Xbox, a PlayStation, a Nintendo Switch and other devices to a meeting with regulators in London, where they showed off Call of Duty and other games to illustrate a dynamic market, people familiar with the visit said.

Regulators are also worried what the deal might mean for the future, when cloud computing lets people stream sophisticated games to various devices, including mobile phones.

In the United States, more than 10 staff members at the F.T.C. are reviewing the deal, a person with knowledge of the agency said. They interviewed executives, including Mr. Nadella and Mr. Smith, in the late summer and fall.

And in a sign that the F.T.C. may be building a legal challenge to the deal, two people said it had recently asked other companies about offering sworn statements to lay out their concerns.

Category: Technology

Source: New York Times

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