While Activision was negotiating the consent decree with the DOJ, its potential parent company, Microsoft, was continuing to defend its proposed $69 billion acquisition of Activision. In December 2022, the FTC sued to block the merger, claiming “the largest ever [acquisition] in the video gaming industry” would enable Microsoft to suppress competitors of Xbox and its rapidly growing subscription content and cloud-gaming business. This case remains pending.
[Read Jonathan Rubin’s Dec. 12, 2022, commentary on the FTC’s challenge, titled, “An Unstoppable Force Meets an Immovable Object: Microsoft to Fight FTC Over Activision Deal.”]
Microsoft has had more success with antitrust agencies overseas. While the European Commission initially put the deal on hold in December 2022, Reuters and Polygon.com reported the Commission’s concerns have been mollified by Microsoft’s commitment to offer licenses to rival gaming companies. Polygon has also reported that the U.K. Competition and Markets Authority has “set aside some of its main concerns” about the merger. It quotes the CMA as stating that “the cost to Microsoft of withholding Call of Duty from PlayStation would outweigh any gains from taking such action.” The deal has also been approved in Japan, Chile, Brazil, Saudi Arabia, and Serbia, Polygon reports.
Non-Statutory Exemption Inapplicable to E-Sports Salary Restrictions
Readers may be wondering why salary caps are commonplace in traditional sports leagues like the NFL, NBA and NHL but not permitted in e-sports leagues. The key distinction is that the salary caps in traditional sports leagues are negotiated and agreed to by player unions as part of the collective bargaining process. As a result, these salary caps (and the agreements containing them) fall under the “non-statutory antitrust exemption,” which was created by the Supreme Court to resolve the inherent conflict between the underlying goals of antitrust laws and labor laws.
Specifically, the non-statutory exemption relieves parties to an agreement restraining trade from antitrust liability where (1) the restraint primarily affects the parties to the agreement and no one else, (2) the agreement concerns wages, hours, or conditions of employment that are mandatory subjects of collective bargaining, and (3) the agreement is produced from bona fide, arm’s-length collective bargaining. The restraints at issue here do not satisfy either the first or third prongs because they affect the e-sports players, who were not parties to the agreement, and were not produced through collective bargaining. Therefore, unlike salary restrictions in other professional sports leagues, those agreed to by Activision and the independent teams are subject to the antitrust laws.