The final day of the Federal Trade Commission (FTC) v. Microsoft case was filled with key closing arguments from both parties, providing an opportunity to reflect on the hearing as a whole. Judge Jacqueline Scott Corley took a moment to ponder an interesting point: would she even be presiding over this case if Sony had signed a Call of Duty deal with Microsoft? This thought provokes further contemplation and highlights one of the tough questions that Judge Corley posed to the FTC.
Throughout the hearing, Judge Corley grilled the FTC on why consumers would be harmed if Microsoft acquired Activision Blizzard. Specifically, she focused on how many PlayStation players would switch to Xbox if Activision’s key game, Call of Duty, disappeared. The FTC relied heavily on Sony, the current market leader in consoles, to support its theory of harm to competition if Microsoft were to make Call of Duty exclusive to Xbox or sabotage the PlayStation version. However, this theory has already been rejected by regulators worldwide, including the European Commission and the Competition and Markets Authority in the UK. Interestingly, the FTC chose to focus on Call of Duty and Xbox console exclusivity instead of exploring the cloud competition concerns that other regulators had raised.
This approach presented the FTC with a difficult case to prove, and as the hearing came to a close, the weaknesses in their argument became apparent. Before the closing arguments, there was a deep dive into the financial aspects of Xbox. Xbox CFO Tim Stuart faced intense questioning regarding the financial models involved in the acquisitions of both Bethesda and Activision Blizzard. It was revealed that Microsoft would need an additional 2 million Xbox Game Pass subscribers per year to offset a potential drop in Call of Duty royalty rates from PlayStation. This information was accidentally leaked by the FTC during the hearing and caused quite a stir. While the exact numbers were supposed to be confidential, it was clear that Microsoft had been considering scenarios where they would make significantly less money from Call of Duty on PlayStation.
Stuart also discussed Microsoft’s opportunities in the mobile gaming market with Activision Blizzard. This aligns with previous statements made by Xbox chief Phil Spencer, who compared the mobile gaming market to the shift towards electric cars. He asserted that Microsoft doesn’t want to be left behind on a business model that won’t exist in the future.
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During the closing arguments, both parties had the opportunity to counter each other and answer questions from Judge Corley. The FTC reiterated its position that Microsoft’s proposed acquisition of Activision Blizzard raised concerns about anti-competitive effects. They argued that the driving force behind Microsoft’s synergies comes from pushing users to join Xbox Game Pass. However, the FTC’s closing argument focused more on the harm to competitors like Sony rather than the harm to consumers. Judge Corley, in fact, pointed out this discrepancy herself, emphasizing that the harm to consumers should be the primary concern.
Judge Corley continued to question the importance of Call of Duty and whether the FTC’s economic expert had considered real-world data in his models. The FTC struggled to provide a satisfactory response, diverting attention to testimony from PlayStation chief Jim Ryan instead of addressing the specific question. This back-and-forth between Judge Corley and the FTC highlighted the difficulties the agency faced in proving how many PlayStation owners would actually switch to Xbox if Call of Duty became exclusive.
Microsoft’s legal team, who had been relatively quiet throughout the hearing, saw an opportunity to exploit the FTC’s struggle. They pointed out that the FTC did not have many answers from their own economic expert, exposing the agency’s weak arguments and enjoying the spectacle.
The hearing also touched on the market definition of consoles, with the FTC and Microsoft engaging in a tedious debate about the Nintendo Switch. Judge Corley surprised everyone by questioning why people couldn’t switch to PCs, arguing that many people had invested in gaming PCs during the pandemic. The FTC responded that they had seen no evidence that Microsoft was benchmarking PCs against Xbox. However, they failed to address the fact that gaming PCs require dedicated GPUs to play games like Call of Duty, making them significantly more expensive and complex compared to standard PCs. Additionally, most PCs purchased each year are laptops, which are not typically capable of running high-end games like Call of Duty. This lack of understanding about the gaming market further weakened the FTC’s arguments.
Towards the end of the hearing, Bethesda games were briefly mentioned, with the FTC mistakenly equating Elder Scrolls 6 to Call of Duty. Microsoft’s head lawyer, Beth Wilkinson, corrected this error, clarifying that Elder Scrolls 6 is actually a single-player game set for release in 2026 and is not similar to Call of Duty, which is a multiplayer and multi-platform game.
Despite all the scrutiny and debate, Judge Corley couldn’t help but express confusion over the fact that the entire case revolved around a single shooter video game. She questioned the importance of this particular game in the grand scheme of competition and consumer harm.
In conclusion, the final day of the FTC v. Microsoft case showcased the weaknesses in the FTC’s arguments, particularly their heavy reliance on Call of Duty and Xbox console exclusivity. Judge Corley’s tough questioning and the FTC’s struggle to provide satisfactory answers exposed the flaws in their theory of harm. The hearing also highlighted the importance of considering the cloud competition concerns that other regulators had raised. As the case draws to a close, it remains to be seen how Judge Corley will ultimately rule.
