Microsoft on Wednesday announced principles intended to promote competition in its app stores, as the company tries to stay a step ahead of policymakers around the world weighing new regulations to prevent large tech companies from abusing their smaller rivals.
Microsoft is trying to win regulatory approval for the largest deal in the company’s history, the $68.7 billion purchase of video game publisher Activision Blizzard. The Federal Trade Commission, led by Lina Khan, is handling the deal, according to a person familiar with the matter who spoke on the condition of anonymity because they were not authorized to speak about it publicly. The deal could also face opposition from regulators abroad, with Smith noting that sign-off is required from 17 regulators around the world.
“We literally have to go around the world and help regulators understand what this acquisition means, what is the market it takes place in, and perhaps most importantly, what will Microsoft do if we have the opportunity to play a larger role in the gaming sector,” Smith said.
The executives are convening with members of Congress and think tanks while in Washington, part of an offensive designed to get ahead of regulatory action, he said. “We recognize that there will be more scrutiny of any large acquisition that’s being made by a large tech company,” Smith said. “It really behooves us to step forward quickly and proactively, and be very transparent about how we will manage this business toward competition law issues and responsibilities we have.”
Microsoft stands to benefit from legislation regulating app stores, which other tech giants, including Apple and Google, have strongly opposed. With the purchase of Activision, the company is moving more aggressively into gaming subscriptions. If legislation such as the Open App Markets Act were to become law, Microsoft would be able to bring its subscription gaming service and even its own gaming store to more devices, including those running Apple operating systems.
Federal scrutiny of competition in the tech industry has escalated in the past two years, with President Biden naming prominent advocates for antitrust reform to key enforcement positions. On the same day that Microsoft announced its plans, the Federal Trade Commission and the Justice Department hosted a news conference about strengthening merger reviews.
The deal has sparked concerns that Microsoft could gain a competitive edge by making popular Activision games exclusive to Xbox and its own devices. Smith clarified that the company committed to uphold Activision’s contract with Sony, the maker of PlayStation, for the popular Call of Duty games through 2024, and that it would extend it on a multiyear basis. Smith also said that the company was interested in bringing Activision titles to Nintendo devices.
Microsoft’s competitors have criticized the company’s embrace of the legislation.
“Disappointing that Microsoft would lobby so hard for a law targeting its competitors, while carving out its own exception for Xbox, which requires its own billing system, doesn’t allow loading of other stores and actually charges higher fees to developers,” tweeted Kent Walker, president of global affairs and chief legal officer at Google and Alphabet.
Smith said Microsoft plans to adapt the Xbox app store to embrace all of the competition principles, though it will take time to do so because of technical limitations. Sarah Bond, corporate vice president of game ecosystem for Xbox, said that the company wants to enable “store-within-a-store experiences” but that it requires tech and business model innovation.