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The Technology 202

A newsletter briefing on the intersection of technology and politics.

Microsoft previews its defense of the Activision-Blizzard deal

The Technology 202

A newsletter briefing on the intersection of technology and politics.

Happy Tuesday! Be sure to tune into my virtual panel this afternoon digging into the Supreme Court’s major content moderation cases. Send news tips and embarrassing screenshots of my own moderating to: cristiano.lima@washpost.com.

Below: Facebook parent Meta threatens to remove U.S. news content, and the FTC says it’s investigating cryptocurrency firms. First:

Microsoft previews its defense of the Activision Blizzard deal

Microsoft offered a preemptive rebuttal against a potential federal challenge of its Activision Blizzard acquisition on Monday, arguing that blocking its $69 billion deal with the gaming giant would be bad for competition and for consumers. 

In his first op-ed on the topic, Microsoft President Brad Smith effectively laid out a road map of how the company may push back on regulators’ claims about the deal.

Responding to criticisms that the acquisition would give Microsoft a dominant position in the gaming industry, Smith emphasized the “huge challenges” the giant faces in its competitors.

  • “Our Xbox remains in third place in console gaming, stuck behind Sony’s dominant PlayStation and the Nintendo Switch. … Acquiring Activision Blizzard would enable Microsoft to compete against these companies through innovation that would benefit consumers,” Smith wrote for the Wall Street Journal.

Officials in Washington have taken an increasingly aggressive stance against efforts by the tech giants to expand by scooping up rivals. Most notably, the Federal Trade Commission challenged Meta’s acquisition of a virtual reality company and a bipartisan group of lawmakers on Capitol Hill have pushed for legislation to restrict mergers by dominant tech companies. 

  • Noting that some officials “worry that any big-tech acquisition will harm consumers,” Smith said, “Microsoft committed in February to govern its new cloud-based game store by the pro-competition principles outlined in the app-store legislation pending in Congress.”

In March, a group of Senate Democrats including Sen. Elizabeth Warren (D-Mass.) called on the FTC to block the deal, voicing concern that it would “further disenfranchise” workers at the company and that Microsoft would seek to quash unionization efforts.

  • Addressing those criticisms more broadly, Smith said the company in May “negotiated a precedent-setting agreement with the Communications Workers of America allowing workers to organize easily at studios, including Activision Blizzard.”

Sony, which would emerge as one of Microsoft’s top competitors, has argued the deal would leave consumers and developers with less choice, including by making major gaming brands such as Call of Duty potentially exclusive to Xbox. 

  • Smith wrote that it would be “economically irrational” for Microsoft to stop making games like‘Call of Duty available on Sony’s PlayStation, saying it would be “disastrous” in “alienating millions of gamers.”

Critics of the deal were unmoved by Microsoft’s arguments. 

Erik Peinert, research manager at the anti-monopoly group American Economic Liberties Project, said Microsoft’s “main argument” has been that it “needs to be even bigger so that it can compete against Sony. We don’t find that very credible.”

Peinert added, “Microsoft already owns around 30 gaming studios and is looking to leverage this merger to unfairly advantage its Xbox platform over other gaming consoles and increase the pricing power of its Game Pass system.”

Microsoft’s acquisition is facing mounting scrutiny from regulators globally. 

Politico reported in November that the FTC “is likely to file an antitrust lawsuit to block” the Activision Blizzard deal, though the agency has not reached a final decision. (In his op-ed, Smith wrote, “The Federal Trade Commission reportedly plans to sue Microsoft to stop our proposed acquisition of Activision Blizzard.”)

The FTC declined to comment on Smith’s op-ed. 

Earlier this month, the European Union launched an investigation into the acquisition, citing concerns Microsoft “may foreclose access” to Activision’s games, as my colleagues Mikhail Klimentov and Shannon Liao report. The reviews mark just two of more than a dozen globally

Our top tabs

Meta threatens to block news as Congress weighs media bargaining bill

Facebook’s parent company on Monday threatened to remove news content from the United States on its platforms if lawmakers pass a bill allowing news publishers to bargain collectively with the tech giants over the distribution of their material, which is under consideration in Congress.

Meta spokesperson Andy Stone said in a statement that they “will be forced to consider removing news from our platform altogether rather than submit to government-mandated negotiations that unfairly disregard any value we provide to news outlets.”

The warning comes as lawmakers on Capitol Hill discuss including the controversial proposal, the Journalism Competition and Preservation Act, in a massive defense authorization package set to be taken up this month, two aides familiar with the matter, who spoke on the condition of anonymity to discuss private negotiations, told my colleague Tony Romm.

It’s part of a broader set of unresolved issues that threaten to bog down the entire package, one of the last vehicles for lawmakers to advance stalled legislation before the new Congress.

The threat follows a familiar playbook for Meta, which last year blocked news in Australia in response to similar legislation aimed at forcing tech companies to pay publishers for content. The company issued the same warning last month in response to parallel efforts in Canada.

A spokesperson for Sen. Amy Klobuchar (D-Minn.), the bill’s lead sponsor in the chamber, declined to comment. Proponents including Klobuchar have billed the proposal as a way to redirect advertising revenue to reeling media organizations, particularly in local news. 

The measure’s potential inclusion in the congressional package also drew pushback Monday from a coalition of consumer advocates, digital rights groups and think tanks, which warned that it could force tech companies to carry “extreme” content and that it would allow large media conglomerates to “domination negotiations,” leaving smaller publishers “unheard.”

FTC says it’s investigating crypto firms

The Federal Trade Commission enforces some advertising and endorsement rules, and cryptocurrency firms like FTX have been criticized for ads to persuade customers to buy cryptocurrencies on that exchange, Bloomberg News’s Leah Nylen and Allyson Versprille report.

“We are investigating several firms for possible misconduct concerning digital assets,” FTC spokeswoman Juliana Gruenwald Henderson told Bloomberg News. 

The Securities and Exchange Commission has also scrutinized the cryptocurrency industry’s endorsement and advertising practices. In October, it charged Kim Kardashian with promoting a cryptocurrency without disclosing how much she was being paid. In recent years, it has settled charges against boxer Floyd Mayweather Jr., music producer DJ Khaled and actor Steven Seagal, who it accused of promoting initial coin offerings without disclosing what they were paid.

Chinese authorities cooperating with U.S. government checks

China’s Ministry of Commerce has helped some Chinese firms go through U.S. government checks to make sure American technologies aren’t being used by China’s military, Bloomberg News’s Jenny Leonard and Debby Wu report

“Chinese firms on the Unverified List have 60 days from Oct. 7 to show their products won’t go to a military end-use or risk being pushed onto the U.S. Entity List, which prohibits trade with U.S. businesses or those utilizing U.S.-sourced technology without a license from Washington,” they write. Spokespeople for the commerce ministry and U.S. Department of Commerce didn’t respond to Bloomberg News’s requests for comment.

Agency scanner

Musk’s Neuralink faces federal probe, employee backlash over animal tests (Reuters)

DOJ antitrust regulators should look at Apple, Google's handling of TikTok, says FCC commissioner (CNN)

Inside the industry

Facebook Parent’s Oversight Board Criticizes ‘Cross Check’ Program That Protects VIP Users

Covid chaos at Foxconn iPhone plant causes 29 percent revenue fall (Financial Times)

German governor quits Twitter, Scholz still mulling options (Associated Press)

Workforce report

Apple’s anti-union tactics in Atlanta were illegal, U.S. officials say (Bloomberg News)

Video game workers at Microsoft and Activision take steps to unionize (New York Times)

Twitter’s janitors are on strike at its San Francisco headquarters (Bloomberg News)

Competition watch

MercadoLibre files complaint against Apple in Brazil, Mexico (Bloomberg News)

Trending

Colorado grandmother sues police detective following SWAT raid based on false 'Find my iPhone' ping (NBC News)

Daybook

  • The Atlantic Council hosts an event on 21st century tools for diplomacy, like technology, today at 10 a.m.
  • Today at noon, join me for a Future of Speech Online panel I'm moderating on free expression cases at the Supreme Court. The three-day event is hosted by the Center for Democracy and Technology and the Stand Together Trust.
  • Undersecretary of Commerce Alan Estevez speaks at a Center for Strategic and International Studies event on AI and export controls today at 1 p.m.

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