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Microsoft calls FTC unconstitutional

Update: Xbox maker retracts allegations that the Commission is violating its Fifth Amendment rights

Original story, December 23, 2022: Microsoft yesterday filed its response to the US Federal Trade Commission's antitrust complaint over its proposed acquisition of Activision Blizzard, as reported by CNBC.

The 37-page response covers numerous arguments Microsoft has already made in public or to other regulators, stating a lack of incentive to make Call of Duty exclusive, a desire to grow its minimal footprint in the mobile gaming space, and painting Sony's protestations as those of a dominant market leader looking to hinder disruptive innovation that could benefit consumers.

"Sony may prefer to protect the revenues it gets from more expensive individual game sales, but the antitrust laws do not serve to insulate the dominant market player and its favored business model from competition," Microsoft said.

However, it also took issue with the FTC itself.

"These proceedings are invalid because the structure of the Commission as an independent agency that wields significant executive power, and the associated constraints on removal of the Commissioners and other Commission officials, violates Article II of the US Constitution and the separation of powers," Microsoft said.

It also took exception to the FTC's practice of having its complaints initially heard by administrative law judges that are appointed by the FTC rather than a judge from the federal circuit and district court system.

"The structure of these administrative proceedings, in which the Commission both initiates and finally adjudicates the Complaint against Microsoft, violates Microsoft's Fifth Amendment Due Process right to adjudication before a neutral arbiter," it said.

Beyond its arguments, Microsoft also acknowledged in its response that it intends to make three future Zenimax titles exclusive to Xbox and PCs. While the names of those games were redacted, Microsoft said all three "are designed to be played primarily alone or in small groups."

It contrasted that to Call of Duty, saying the Activision shooter was more analogous to Zenimax games it has continued to support on multiple platforms like Fallout 76 or Elder Scrolls Online, "because these games are designed to be played together by broad communities of gamers on different platforms."

Update, January 6, 2023:: Axios reports that Microsoft has retracted its allegations against the FTC.

A revised filing removes the section in which the platform holder suggested the Commission's actions violate the US Constitution, although maintain the rest of its arguments that its proposed acquisition of Activision Blizzard will not affect competition in the games industry.

Microsoft public affairs spokesperson told David Cuddy told Axios: "We initially put all potential arguments on the table internally and should have dropped these defenses before we filed.

"We appreciated feedback about these defenses and are engaging directly with those who expressed concerns to make our position clear."