Microsoft Plays The ‘Nice Guy” Strategy to Close Activision’s Megadeal

FTC said that the deal should be terminated because it could harm consumers. The FTC stated that Microsoft, the maker of the Xbox console could use Call of Duty, and other popular Activision games to attract gamers from competitors, particularly Sony which makes its PlayStation console.

Microsoft’s conciliatory approach is part a near complete cultural transformation that the company has undergone since 1990s when it was known for its strong-arm tactics to stop competitors. The company’s CEO Satya Nadella and Smith have been able to demonstrate that it has grown over the years.

The Activision deal has more implications than Microsoft. The FTC lawsuit marks a turning point in government scrutiny of tech companies of all sizes. Khan has a strong trust-busting agenda for the case. Legal experts say it might prove difficult to win. Other tech giants may not be able force Microsoft to approve the megadeal.

Sid Parakh is a portfolio manager at Becker Capital which invests in Microsoft. It’s more than just a deal. It also serves as a statement to FTC.

Microsoft has more than $100 billion in spending capacity, so he said, “They don’t want any delay now, and then every acquisition will be shot down.”

Activision’s acquisition must be completed by mid-July, or Microsoft will have to pay up to $3 billion as a breakup fee. There are many hurdles to overcome, including approval by other global regulators, particularly in Britain and the European Union. Microsoft could reach a formal agreement with them and would be able to leave the FTC at an important moment.

Microsoft was sued by the FTC in an administrative court

The FTC does not have the power or authority to prevent the deal from closing while it is pending. The FTC would have to decide whether to file an order against the acquisition in federal court if other regulators approve the deal. Microsoft could win a quick legal victory by moving quickly through the injunction process.

Bobby Kotick (CEO of Activision) stated Wednesday that there is no reason why our transaction should be stopped from closing. “We are confident that we will win on the merits.”

The FTC declined comment to Smith’s conversation about Khan’s strategy with Microsoft. Holly Vedova is the Director of the FTC’s Bureau of Competition. She stated that the agency is always open to considering proposals from companies seeking to resolve antitrust concerns.

Microsoft is trying to find a balance between appearing open to settlements and preparing to destroy FTC’s case before the court. Microsoft has hired Beth Wilkinson to represent it before the FTC’s in-house court. She was a prosecutor in the 1995 Oklahoma City Bombing case and is now a leading corporate litigator in the United States.

Smith expressed optimism that the case would avoid a messy trial due to Microsoft’s past experiences with antitrust enforcement.

The company’s scorched-earth business strategies in the 1990s were well-known. They bundled software products together to compete with other companies. Bill Gates, Microsoft’s co-founder, dismissed regulators’ scrutiny of the company in 1992. He stated, “The worst thing that could happen is that I could fall on the steps of FTC, hit mine head, and kill myself.”