(Bloomberg) -- Microsoft Corp. began its court fight with the Federal Trade Commission over the $69 billion purchase of Activision Blizzard Inc. by saying that even an executive at rival Sony Corp. had acknowledged the deal wasn't "an exclusivity play" to hurt the PlayStation gaming console.
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The FTC wants to block the transaction while its legal challenge is pending, and the two sides are arguing the case at a five-day court hearing that began Thursday in San Francisco. Microsoft, maker of the Xbox console, is defending the blockbuster deal, which would catapult it to the No. 3 position in the global games market after Tencent Holdings Ltd. and Sony.
During opening statements, Microsoft attorney Beth Wilkinson sought to counter the FTC's claim that the deal would hurt competition by reading the contents of an email sent by James Ryan, who heads Sony Interactive Entertainment, to a former colleague shortly after the Activision transaction was announced in January 2022.
Ryan said the deal wasn't an attempt to push PlayStation out of the console market and that after speaking with Microsoft and Activision executives, he was "pretty sure we will continue to see" Activision's top-selling shooter game, Call of Duty, "on PlayStation for many years to come," Wilkinson said as she read the email in court.
"We have some good stuff cooking," Ryan wrote in the email discussed in court. "I'm not complacent. I'd rather this didn't happen, but we'll be OK. We'll be more than OK."
Microsoft's main goal in acquiring Activision, which also offers mobile titles like Candy Crush, is to expand its share of the global mobile gaming market, which is currently about 0.3%, Wilkinson said.
The regulator claims the transaction will hurt competition in the markets for console gaming and cloud gaming, which can allow streaming of games onto PCs and consoles rather than downloading them. For example, Microsoft could exclude Activision games from rival Sony PlayStation devices, which dominate the console market, the FTC has said.
FTC lawyer James Weingarten told US District Court Judge Jacqueline Scott Corley that the combined company after the deal "will have the ability to harm competition" in the console, subscription game service and cloud-gaming markets. "The myriad strategies available for a combined company to affect its rivals," are at the heart of the case and not just the Microsoft's potential move to take games away from other platforms, Weingarten said.
The FTC will present evidence during the hearing that shows mobile gaming holds "a very small value" of the deal and that Microsoft's attempt to "break the duopoly of Apple and Google" in the mobile market is "speculative," Weingarten said.
Matt Booty, head of Xbox Game Studios at Microsoft, Pete Hines, who heads publishing at Microsoft game unit Bethesda, and Sarah Bond, corporate vice president of gaming ecosystem at Microsoft Xbox, were at the witness stand to discuss Microsoft's gaming business strategy. On Friday, the FTC will present video clips from a pre-recorded deposition of Sony's Ryan.
Microsoft Chief Executive Officer Satya Nadella and Activision CEO Bobby Kotick are expected to testify in court to defend the deal before the hearing ends June 29.
The case is Federal Trade Commission v. Microsoft Corp., 3:23-cv-02880, US District Court, Northern District of California (San Francisco).
--With assistance from Cecilia D'Anastasio.
(Updates with comments from hearing, plans for CEOs to testify.)
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