Microsoft Corp (NASDAQ: MSFT) is in focus this morning after the Federal Trade Commission sued the tech behemoth in an attempt to block its $69 billion acquisition of Activision Blizzard (NASDAQ: ATVI)
Microsoft-Activision merger could hurt competition
Opposition from the FTC is predicated on the possibility that the said buyout will suppress competition. The complaint reads:
MSFT will have ability and increased incentive to withhold or degrade Activision content in ways that substantially lessen competition – including on product quality, price and innovation, [which] would harm consumers in multiple markets.
One of those markets could be the United Kingdom.
Regulators in that country are also currently evaluating if the mega merger will meaningfully reduce competition in the gaming space. Remember that Microsoft will have to pay $3.0 billion in break-up fee to Activision Blizzard in an event of a regulatory impasse.
Microsoft stock is roughly flat today.
Jim Cramer’s take on the FTC complaint
Many, including Cowen’s Aaron Glick are convinced that Microsoft has the one up here since the FTC complaint is based not on data but assumptions.
But Jim Cramer reminds that the regulatory opposition, nonetheless, is in line with the law. On CNBC’s “Squawk on the Street”, he said:
There’s something called tied-house federal law that a liquor company can’t own a restaurant because it’d favour that restaurant. So, the doctrine here is that MSFT that makes Xbox can’t own [Activision Blizzard because they’ll favour Xbox].
It’s noteworthy here that Microsoft has already agreed to making “Call of Duty” available on Nintendo for ten years once its Activision takeover closes. The multinational has offered a similar deal to Sony as well.
Activision stock is also keeping flat on Friday.
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