Chiefs of Microsoft and Activision testify that merger will benefit consumers

Microsoft CEO Satya Nadella appeared in federal court on Wednesday to pledge his support for open platforms and consumer choice.

“If it were up to me, I would really like to get rid of all ‘exclusives on consoles’,” testified Mr Nadella, refuting claims from tech regulators that Microsoft’s deal with the video game giant would limit competition and only sell the games from Activision. for players on Microsoft’s Xbox console. “I have no love for that world.”

The fourth day of a hearing in U.S. District Court in San Francisco that could determine the outcome of the deal was the high-profile session, which featured appearances from Mr. Nadella and Activision CEO Bobby Kotick.

The Federal Trade Commission’s challenge to the blockbuster acquisition, led by its chair, Lina Khan, is seen as a test of whether more aggressive efforts to curb tech giants can be successful. The FTC is seeking a preliminary injunction that would prohibit the companies from closing the deal before the agency has had a chance to argue its case in internal court.

Microsoft has said such a long delay would most likely make the deal a downfall, a perspective Mr Kotick shared in his testimony on Wednesday.

The F.T.C. has argued that the merger would hurt competition in the video game industry and harm consumers because Microsoft could pull Activision’s games, such as Call of Duty, from its rival Sony’s PlayStation console. Mr Kotick promised he had no intention of doing so, although the decision will ultimately not be his if his company is taken over.

“You would revolt if you removed the game from one platform,” said Mr. Kotick. “It would damage the company’s reputation.” Mr. Nadella also said he wouldn’t remember Call of Duty.

Under Ms. Khan, the FTC has sued Meta, Microsoft and Amazon, arguing that Big Tech’s vast power over communications, social media and online commerce allows the companies to build monopolies and harm consumers.

After Microsoft announced early last year that it planned to reshape its Xbox business by buying Activision, the company entered into agreements with other video game companies, such as Nintendo, to show regulators that the deal would benefit gamers and increase the would not restrict access to Activision’s games.

Most government agencies, including the European Commission, were convinced. But the FTC and Britain’s Competition and Markets Authority are trying to block the deal.

Arguments in court focused on the practice of exclusivity – releasing a highly anticipated game on only one console. Microsoft has repeatedly promised it won’t make Call of Duty an Xbox exclusive if it acquires Activision, and offered Sony a contract outlining that guarantee in writing.

But the FTC argued in court last week that Microsoft moved quickly to buy ZeniMax Media and its line of gaming studios for $7.5 billion in 2020 when it realized that Sony could pay to buy one of ZeniMax’s important upcoming games, Starfield, exclusive to PlayStation. New ZeniMax titles, including Starfield, are now exclusive to the Xbox.

Jim Ryan, the CEO of Sony, testified in a taped video deposition that he thought that even if Call of Duty stayed on PlayStation, Microsoft would try to “drive Playstation gamers onto the Xbox platforms” by somehow degrading the Call of Duty experience on PlayStation.

“I believe they will somehow use Call of Duty to harm us,” said Mr. Ryan.

But Mr. Nadella testified that he was against a walled-in approach to gaming.

“I grew up in a company that always believed that software should run on as many platforms as possible,” he said. “And I believe in that.”

Microsoft has tried to portray itself as a distant third in a three-player console market dominated by Nintendo and Sony. Phil Spencer, the head of Xbox, said that as a third-place competitor, Xbox was “not a robust company.”

Mr. Spencer did acknowledge that Microsoft has had discussions about possibly excluding Activision games other than Call of Duty from PlayStation.

The FTC has argued that Microsoft’s acquisition of Activision would also give it an unfair advantage in gaming subscription services and the burgeoning cloud gaming market.

Judge Jacqueline Scott Corley is expected to rule on whether to grant the injunction before July 18, the date the deal is expected to close. At times, her questions in court were skeptical of some of the FTC’s arguments.

For example, the FTC tried to get Mr. Spencer to swear to put Call of Duty on PlayStation for at least 10 years, regardless of the terms Sony requested as part of that agreement. Judge Corley seemed to feel that such a blanket promise was unrealistic, especially if Sony asked for something unreasonable, like getting Call of Duty for free.

“Well, it won’t be for zero dollars,” Judge Corley said impatiently. “That was understood.”

David McCabe contributed reporting from Washington.