Microsoft, Activision CEOs to defend $69 billion deal in fight with FTC

By Malathi Nayak
 

Microsoft Corp. Chief Executive Officer Satya Nadella and Activision Blizzard Inc. CEO Bobby Kotick will be in court this week to try to persuade a federal judge in California to reject the Federal Trade Commission’s effort to block their $69 billion deal.
 

US District Judge Jacqueline Scott Corley is presiding at a five-day hearing in San Francisco starting Thursday over the FTC’s bid to prevent Microsoft from acquiring Activision while the agency’s legal challenge to the deal is pending. Nadella and Kotick were listed as key witnesses in a joint court filing Tuesday.

Other top Microsoft executives, including Chief Financial Officer Amy Hood and Phil Spencer, who heads Microsoft Gaming, are expected to take the witness stand, as well as Activision’s Chief Financial Officer Armin Zerza, according to the filing.

By appearing in court, the executives will defend the blockbuster deal, which would catapult Microsoft to the No. 3 position in the global games market after Tencent Holdings Ltd. and Sony Group Corp., and submit to tough questioning from FTC lawyers.

It’s unclear when Corley may rule, but a decision could come as soon as right after the hearing, which is slated to last through June 29. The deadline for closing the deal is July 18. 

FTC attorneys have argued in filings that the deal will hurt competition in the markets for console gaming and cloud gaming, which lets gamers stream games to PCs and consoles rather than downloading them. For example, Microsoft could exclude Activision games, specifically the popular shooter game Call of Duty, from rival Sony PlayStation devices, which dominate the console market, the regulator said. 

Microsoft claims it won’t limit Call of Duty to its Xbox console, according to court filings. It also argues the FTC can’t establish that the nascent cloud-gaming market will develop or that Microsoft would be a dominant player in it.

“Our most senior executives will testify in person to answer any questions about our business strategy,” said David Cuddy, a Microsoft spokesman. “This deal means more choice for gamers, a fact that only becomes clearer the more you look at the case.”

Nadella and Kotick will both testify live for 45 minutes, according to the court filing. The Microsoft CEO will face questioning about the deal and his gaming unit strategy, while Kotick will discuss Activision’s game business and future plans.

The companies didn’t disclose what day or time the CEOs would testify, but the schedule may be discussed at a pre-evidentiary hearing on Wednesday.

US authorities are not the only ones who have challenged the deal. UK competition regulators vetoed the merger, though Microsoft is appealing that order.

The case is Federal Trade Commission v. Microsoft Corp., 3:23-cv-02880, US District Court, Northern District of California (San Francisco).