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Microsoft concedes that it should not have argued that the FTC was unconstitutional

Microsoft concedes that it should not have argued that the FTC was unconstitutional

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Zoom in / Microsoft’s arguments against the FTC’s stoppage of Activision Blizzard’s purchase now rely more on Call of Duty than constitutional power and corporate civil rights.

Michael Ciaglo/Bloomberg via Getty Images

Microsoft has changed its response to the FTC’s lawsuit trying to stop the $69 billion purchase of Activision Blizzardno longer arguing that the FTC is unconstitutional in nature and denies the company’s 5th Amendment rights.

David Cuddy, Microsoft Public Affairs Spokesperson, said Stephen Totillo of Axios that the company “put all potential arguments on the table internally and had to waive those defenses before we filed. The FTC has an important mission to protect competition and consumers, and we quickly updated our response to omit language suggesting otherwise based on the Constitution,” Cuddy told Axios.

The FTC’s initial response to Microsoft (PDF) stated that the proceedings against Microsoft were invalid “because the structure of the Commission as an independent agency that wields significant executive power, and the associated restrictions on the removal of Commissioners and other Commission officials, violate Article II of the U.S. Constitution and the separation of powers.” Another count argues that the use of an administrative law judge, rather than a typical life judge, is a violation of Article III.

Based on these allegations, Microsoft also contends that the FTC’s procedures, the nature of its administrative procedures, and the Commission’s alleged “substantial prejudice” to its case, Microsoft’s rights to fair trial under the 5th Amendment were violated.

Modified Microsoft response (PDF) removes the constitutional claims from its counterarguments. It stuck to the software giant’s broader claims that the Activision acquisition would not lock up subscription game services or cloud gaming services, that it had made offers to license games such as Call of Duty to Nintendo, Valve and other platformsand that the FTC’s claims are “too speculative” and not actionable.

Activision, which did identical arguments about his constitutional rights in an FTC investigation and proceeding in his initial response, will also drop that aspect, according to Axios.

Familiar and timely arguments

The companies’ pushback against regulators comes as the U.S. Supreme Court considers cases that could give companies more power to seek constitutional protections against regulatory agencies. Axon Enterprise v. Federal Trade Commission includes a body camera company whose acquisition of a competitor is under investigation by the FTC. Axon filed for an injunction and argued that the FTC and its ruling process were unconstitutional, arguments echoed in part in Microsoft’s initial response.

Microsoft, a company deeply familiar with FTC scope and proceduresmore broadly, it seeks to position itself as a weak underdog in certain gaming markets rather than an anti-competitive force. In The Wall Street JournalVP and President of Microsoft Brad Smith described his company as the third largest in the console market, a barely relevant player in mobile gaming and just the first major company to innovate around monthly gaming subscriptions.

Microsoft and Activision Blizzard face numerous other claims of unfair practices. Call of Duty gamers sued Microsoft in late December, claiming the acquisition would allow it to “exclude competitors, limit production, reduce consumer choice, raise prices and further impede competition.” The European Commission is transaction investigationas well as the UK Competition and Markets Authority a “Phase 2” investigation has begun..


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