Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 1 of 45
`
`
`
`Joseph M. Alioto (State Bar No 42680)
`Tatiana V. Wallace (SBN 233939)
`ALIOTO LAW FIRM
`One Sansome Street, 35th Floor
`San Francisco, CA 94104
`Telephone:
`(415) 434-8900
`Facsimile:
`(415) 434-9200
`Email:
`jmalioto@aliotolaw.com
`
`
`Joseph R. Saveri (State Bar No. 130064)
`Steven N. Williams (State Bar No. 175489)
`Cadio Zirpoli (State Bar No. 179108)
`Elissa Buchanan (State Bar No. 249996)
`David H. Seidel (State Bar No. 307135)
`JOSEPH SAVERI LAW FIRM, LLP
`601 California Street, Suite 1000
`San Francisco, California 94108
`Telephone:
`(415) 500-6800
`Facsimile:
`(415) 395-9940
`Email:
`jsaveri@saverilawfirm.com
`swilliams@saverilawfirm.com
`czirpoli@saverilawfirm.com
`eabuchanan@saverilawfirm.com
`dseidel@saverilawfirm.com
`
`Counsel for Plaintiffs
`
`
`
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`DANTE DEMARTINI, CURTIS BURNS JR.,
`NICHOLAS ELDEN, JESSIE GALVAN,
`CHRISTOPHER JOSEPH GIDDINGS-LAFAYE,
`STEVE HERRERA, HUNTER JOSEPH
`JAKUPKO, DANIEL DERMOT ALFRED
`LOFTUS, BEOWULF EDWARD OWEN, and
`IVAN CALVO-PÉREZ,
`
`
`Plaintiffs,
`
`Case No.
`
`COMPLAINT TO PROHIBIT THE
`ACQUISITION OF ACTIVISION
`BLIZZARD BY MICROSOFT
`CORPORATION IN VIOLATION OF
`SECTION 7 OF THE CLAYTON
`ANTITRUST ACT, 15 U.S.C. § 18
`
`
`Defendant.
`
`
`
`
`
`
`
`
`
`
`
`MICROSOFT CORPORATION, a Washington
`corporation,
`
`
`v.
`
`
`
`
`
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 2 of 45
`
`
`
`TABLE OF CONTENTS
`
`INTRODUCTION ....................................................................................................................... 1 
`
`JURISDICTION AND VENUE................................................................................................... 3 
`
`DIVISIONAL ASSIGNMENT .................................................................................................... 3 
`
`PARTIES ...................................................................................................................................... 3 
`
`Plaintiffs ............................................................................................................................ 3 
`
`Microsoft Corporation ...................................................................................................... 5 
`
`BACKGROUND .......................................................................................................................... 7 
`
`Activision Blizzard ............................................................................................................ 8 
`
`Video Game Platforms .................................................................................................... 10 
`
`a) 
`
`b) 
`
`c) 
`
`d) 
`
`Console Gaming ...................................................................................... 10 
`
`PC Gaming .............................................................................................. 12 
`
`Mobile Gaming ......................................................................................... 13 
`
`Cloud-Based Gaming Services ................................................................. 14 
`
`Gaming Content .............................................................................................................. 14 
`
`a) 
`
`b) 
`
`c) 
`
`Video Game Developers ........................................................................... 15 
`
`Video Game Publishers ............................................................................. 15 
`
`Video Game Distributors .......................................................................... 15 
`
`RELEVANT PRODUCT MARKETS ........................................................................................ 16 
`
`GEOGRAPHIC MARKET ........................................................................................................ 24 
`
`The Merger May Substantially Lessen Competition or Tend to Create a Monopoly ................... 26 
`
`The Video Game Industry Is Characterized by Significant Network Effects and Barriers to
`Entry ............................................................................................................................... 29 
`
`Microsoft Directly Competes with Activision Blizzard in Game Development for the Console and
`PC Gaming Markets ......................................................................................................... 31 
`
`Microsoft Directly Competes with Activision Blizzard in Game Publishing for the Console and
`PC Gaming Markets ........................................................................................................ 32 
`
`Microsoft Directly Competes with Activision Blizzard in Game Distribution for the Console and
`PC Gaming Markets ........................................................................................................ 33 
`
`The Proposed Consolidation May Substantially Lessen Current Competition in the Video Game
`Development, Publishing, and Distribution Markets ....................................................... 33 
`
`ii
`
`
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 3 of 45
`
`
`
`The Proposed Consolidation May Substantially Lessen Competition in the Labor Market ......... 34 
`
`The Proposed Consolidation May Give Microsoft Outsized Market Power and the Ability to
`Further Harm Competition by Foreclosing Inputs to Rivals in the Relevant Markets ..... 34 
`
`PRAYER FOR RELIEF .............................................................................................................. 40 
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`iii
`
`
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 4 of 45
`
`
`
`INTRODUCTION
`
`1.
`
`This is a private antitrust action seeking an order of the Court prohibiting the
`
`proposed acquisition of Activision Blizzard, Inc. by Microsoft Corporation as a violation of Section
`
`7 of the Clayton Antitrust Act (15 U.S.C. § 18). The threatened loss or damage to the Plaintiffs and
`
`to the public at-large by the merging of two giants in the video game industry is extensive and broad.
`2.
`
`On January 18, 2022, Microsoft announced plans to acquire Activision Blizzard.
`
`Microsoft agreed to pay $68.7 billion ($68,700,000,000), or approximately $95 per share in an
`
`all-cash transaction. Under the proposed terms of the merger, Microsoft would acquire all the
`
`outstanding stock of Activision Blizzard. Upon completion of the deal, Activision Blizzard would
`
`be wholly owned by Microsoft.
`3.
`
`The proposed acquisition price of $68.7 billion in cash demonstrates the merger is
`
`significant and non-trivial. Indeed, if the acquisition is allowed to proceed, it would be the largest
`
`merger of technologies companies ever.
`4.
`
`Microsoft and Activision Blizzard are each significant rivals in the video game
`
`development, publishing, and distribution markets.
`5.
`
`Microsoft and Activision Blizzard both develop, publish, and distribute gaming
`
`content for purchase by consumers, and they directly compete in this market.
`6.
`
`Microsoft and Activision Blizzard are two of the largest gaming corporations in the
`
`United States with significant market share in the video game markets for developing, publishing
`
`and distributing video games.
`7.
`
`Microsoft owns and sells the Xbox gaming consoles and the Windows operating
`
`system, two of the primary platforms on which games are played.
`8.
`
`The development and publishing of video games for these and other platforms are
`
`critical inputs to the popularity and continued viability of gaming platforms.
`9.
`
`The development and publishing of video games are also critical inputs to new
`
`gaming platforms and distribution methods, such as multi-game subscription services and cloud-
`
`based gaming.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`1
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 5 of 45
`
`
`
`10.
`
`In addition to the elimination of a significant rival, the proposed acquisition may
`
`give Microsoft far-outsized market power in the video game industry and may enable Microsoft to
`
`foreclose rivals to critical inputs and important markets.
`11.
`
`The current trend toward concentration, the lessening of competition, and the
`
`tendency to create a monopoly in the video game industry was already harming competition at an
`
`alarming rate before the proposed acquisition was announced. Both companies are the products
`
`of substantial campaigns to acquire, merge with, and consolidate numerous video game
`
`companies to achieve their current stature in the video game industry.
`12.
`
`If Microsoft’s proposed acquisition of Activision Blizzard is allowed to proceed,
`
`the video game industry may lose substantial competition, and Microsoft may have far-outsized
`
`market power, with the ability to foreclose rivals, limit output, reduce consumer choice, raise
`
`prices, and further inhibit competition.
`13.
`
`The proposed acquisition is a violation of Section 7 of the Clayton Antitrust Act
`
`(15 U.S.C. § 18) in that the effect of the potential consolidation “may be substantially to lessen
`
`competition or tend to create a monopoly” in various markets in the video game industry.
`14.
`
`This private action is authorized under Section 16 of the Clayton Antitrust Act (15
`
`U.S.C. § 26), which provides in relevant part that “any person…shall be entitled to sue and have
`
`injunctive relief …against threatened loss or damage by a violation of the antitrust laws.” The
`
`remedy afforded to private plaintiffs includes injunctive relief prohibiting any potential unlawful
`
`acquisition as well as divestiture.
`15.
`
`The Clayton Act codifies Congress’ “intent to encourage vigorous private
`
`litigation against anticompetitive mergers” that may substantially lessen competition. California
`
`v. Am. Stores Co., 495 U.S. 271, 284 (1990).
`16.
`
`Plaintiffs bring this action under the authority of Section 16 of the Clayton
`
`Antitrust Act and allege that the proposed acquisition of Activision Blizzard by Microsoft
`
`constitutes a substantial threat of injury to the Plaintiffs and the public because the acquisition
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`2
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 6 of 45
`
`
`
`may have the effect of substantially lessening competition and may tend to create a monopoly in
`
`various markets in violation of Section 7 of the Clayton Antitrust Act.
`17.
`
`Competition rather than combination is the rule of trade in the United States so
`
`that these Plaintiffs, and the public at large, may enjoy the benefits and innovations that come
`
`from competition, including, among others, improved quality and increased choices at the lowest
`
`possible prices.
`18.
`
`Vigorous enforcement of the antitrust laws by private persons is an essential part
`
`of the congressional plan to ensure that competition rather than monopoly is, and remains, the
`
`rule of trade in the United States, including in the video game industry.
`
`JURISDICTION AND VENUE
`
`19.
`
`The proposed acquisition is in and substantially affects the interstate and foreign
`
`commerce of the United States in that video game consoles, personal computers, smartphones,
`
`and the video games that are played on those platforms, including cloud-gaming services, are sold
`
`throughout the United States.
`20.
`
`This Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1331, 1337(a)
`
`and Sections 7 and 16 of the Clayton Act (15 U.S.C. §§ 18 and 26).
`21.
`
`Jurisdiction and venue are proper in this judicial district pursuant to 15 U.S.C.
`
`§§15, 22, 26, and 28 U.S.C. § 1391.
`
`DIVISIONAL ASSIGNMENT
`
`22.
`
`Pursuant to Civil Local Rule 3-5.(b), assignment of this case to the San Francisco
`
`Division is proper because a substantial number of the Plaintiffs reside in and practice gaming in
`
`San Francisco.
`
`PARTIES
`
`Plaintiffs
`23.
`
`The Plaintiffs named below are individual citizens of the cities and states listed.
`
`Each Plaintiff is a consumer of video games, all with the express interest and intent in ensuring
`
`that the industry remains competitive, with the utmost innovation, output, choice, and price
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`3
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 7 of 45
`
`
`
`constraints, now and in the future. The potential acquisition of Activision Blizzard by Microsoft
`
`threatens loss and harm to the Plaintiffs, and to the public at large, of the salutary benefits of
`
`substantial competition within the video game industry.
`24. Dante DeMartini is a video gamer located in San Francisco, California. Mr.
`
`DeMartini plays video games on the PlayStation console and on his personal computer using
`
`Windows OS. Mr. DeMartini plays or has purchased titles from Activision Blizzard, including
`
`multiple versions of Call of Duty, World of Warcraft, Overwatch, Overwatch 2, Starcraft II, Diablo
`
`III, and Hearthstone.
`25.
`
`Curtis Burns Jr. is a video gamer located in San Francisco, California. Mr. Burns
`
`plays video games on the PlayStation console. Mr. Burns plays or has purchased titles from
`
`Activision Blizzard, including Call of Duty.
`26. Nicholas Elden is a video gamer located in Hoboken, New Jersey. Mr. Elden plays
`
`video games on Xbox, PlayStation, Nintendo Switch, and on mobile devices. Mr. Elden plays or
`
`has purchased titles from Activision Blizzard, including Call of Duty, Diablo, Tony Hawk, and
`
`others.
`27.
`
`Jessie Galvan is a video gamer located in San Francisco, California. Mr. Galvan
`
`plays video games on the PlayStation 5 console. Mr. Galvan plays or has purchased titles from
`
`Activision Blizzard, including Call of Duty.
`28.
`
`Christopher Joseph Giddings-LaFaye is a video gamer located in San Rafael,
`
`California. Mr. Giddings plays video games on his personal computer using Windows OS. Mr.
`
`Giddings plays or has purchased titles from Activision Blizzard, including Call of Duty and
`
`Overwatch.
`29.
`
`Steve Herrera is a video gamer located in Oakland, California. Mr. Herrera plays
`
`video games on PlayStation consoles and the Nintendo Switch. Mr. Herrera plays or has
`
`purchased titles from Activision Blizzard, including Call of Duty titles, Overwatch, Overwatch 2,
`
`Crash Bandicoot, and Marvel Ultimate Alliance.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`4
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 8 of 45
`
`
`
`30. Hunter Joseph Jakupko is a video gamer located in Los Angeles, California.
`
`Hunter Joseph Jakupko plays video games on Xbox and PlayStation consoles as well as his
`
`personal computer using Apple OS. Mr. Jakupko plays or has purchased titles from Activision
`
`Blizzard, including Call of Duty: Modern Warfare 2, Call of Duty: Warzone 2, World of Warcraft,
`
`and Overwatch 2.
`31. Daniel Dermot Alfred Loftus is a video gamer located in San Rafael, California.
`
`Mr. Loftus plays video games on PlayStation consoles. Mr. Loftus plays or has purchased titles
`
`from Activision Blizzard, including Call of Duty and Overwatch.
`32.
`
`Beowulf Edward Owen is a video gamer located in Las Cruces, New Mexico. Mr.
`
`Owen plays video games on his personal computer using the Windows operating system and Xbox
`
`consoles. Mr. Owen plays or has purchased titles from Activision Blizzard including Call of Duty
`
`and Overwatch.
`33.
`
`Ivan Calvo-Perez is a video gamer located in San Francisco, California. Mr. Calvo-
`
`Perez plays video games on the PlayStation consoles and on his personal computer using
`
`Windows OS. Mr. Calvo-Perez plays or has purchased titles from Activision Blizzard, including
`
`Call of Duty, Diablo, Starcraft, and Warcraft 3.
`
`Microsoft Corporation
`34. Defendant Microsoft Corporation is a corporation incorporated under the laws of
`
`the State of Washington with its principal place of business in Redmond, Washington. Microsoft
`
`is a global technology company.
`35. Microsoft manufactures and sells the Xbox gaming console, a gaming platform
`
`capable of processing video games developed for the platform and offers for sale related services.
`36.
`
`For the most recent generation of Xbox consoles Microsoft sold 7.47 million units
`
`by July 2022, nearly the same number as its closest competitor, the Sony PlayStation.
`37.
`
` Microsoft CEO Satya Nadella announced that the company was “the market
`
`leader in North America for three quarters in a row among next gen consoles,” in a July 26, 2022
`
`earnings call.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`5
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 9 of 45
`
`
`
`38. Microsoft owns and develops the Windows operating system. Windows is the
`
`primary computer operating system for which computer video games are developed.
`39. Microsoft’s Windows’ market share of computer operating systems is roughly 70–
`
`80% worldwide. For computer gaming, that share is roughly 90%.
`40.
`
`This market share is also reflected in the number of games developed and available
`
`for the Microsoft Windows operating system compared to other operating systems.
`41. Microsoft is a developer, publisher, and distributor of video games for consoles,
`
`PCs, and mobile devices.
`42. Microsoft owns 23 different game development studios, including some of the
`
`largest. According to Microsoft, Microsoft is “responsible for developing and publishing some of
`
`the biggest video game franchises in history,” including Age of Empires, Forza, Gears of War, Halo,
`
`Minecraft, Fallout, Microsoft Flight Simulator, DOOM, The Elder Scrolls, and many more.
`43. Microsoft is one of the only game developers and publishers that can afford to
`
`invest the time, funding, and human resources required to develop and sustain top game
`
`franchises like Minecraft or Halo.
`44.
`
`According to a report by the Congressional Research Service, Microsoft is the
`
`largest single video game publisher in the United States by market share.
`45. Microsoft distributes games through the Microsoft Store, which sells Xbox and
`
`Windows PC games.
`46. Microsoft also distributes games through its Game Pass subscription services that
`
`allow consumers to pay a monthly fee to have access to an entire library of games on either Xbox
`
`or Windows PC or both.
`47.
`
`In March of 2022, Game Pass accounted for about 60% of the video game
`
`subscription market already.
`48. Microsoft offers cloud gaming through its Xbox Cloud Gaming service.
`49.
`
`Cloud-based gaming is a new model of gaming in which users connect to remote
`
`gaming servers through the internet.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`6
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 10 of 45
`
`
`
`50. Microsoft operates cloud-based gaming servers at data centers located throughout
`
`the world. Microsoft hosts games on these servers and streams them to a user’s devices.
`51.
`
`The server runs the game and processes gamer inputs in real-time, replicating the
`
`experience of playing games natively.
`52.
`
`Since the video games are processed on the server and not the user’s device,
`
`cloud-based gaming allows users to play video games on virtually any device, so long as it has a
`
`sufficiently fast internet connection.
`53. Microsoft also owns and runs its Azure cloud services.
`54.
`
`Azure is used primarily for enterprise and business server solutions, but it is also
`
`used as a backend platform for hosting and supporting live games, called Azure PlayFab, which
`
`supports live multiplayer games such as Microsoft’s Minecraft. Microsoft also uses its Azure
`
`cloud services for cloud-based gaming.
`55.
`
`PlayFab is a complete server-side platform to create, manage and run real-time
`
`games. Microsoft launched this backend development solution in 2014.
`
`56.
`
`industry.
`57.
`
`BACKGROUND
`
`The video game industry is a fast-evolving, and quickly growing modern
`
`Revenue in the video game industry is projected to reach $197 billion this
`
`year, with an annual growth rate of 7.67%, reaching $285 billion by 2027.
`58.
`
`In 2021, there were an estimated 3.24 billion consumers of video games
`
`globally (roughly half the world’s population), with 226.6 million gamers in the United
`
`States alone.
`59.
`
`That equates to roughly 68% of the U.S. population playing some form of
`
`video games, after a 30% increase during the Covid-19 pandemic in 2020.
`60.
`
`As with many other tech industries, the video game industry changes rapidly with
`
`technological advances and creative innovation. The industry has changed dramatically from its
`
`humble beginnings roughly 50 years ago, when Pong was released in 1972.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`7
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 11 of 45
`
`
`
`61.
`
`In recent years, the trend towards concentration of power in the video game
`
`industry has increased dramatically.
`62.
`
`In 2021 alone, there were 1,159 mergers worth a total of $85.4 billion, the highest
`
`in history and over three times the deal value of mergers in the video game industry in 2020.
`63.
`
`That number was quickly surpassed just six months into 2022, which saw $107
`
`billion spent on acquisitions across 651 transactions.
`64.
`
`The rapid concentration of the video game industry has not escaped notice by
`
`industry participants and consumers. Nathan Brown, a game consultant and industry author,
`
`suggested that the video game industry is “concentrating power overwhelmingly in the hands of .
`
`. . [a] small number of corporations.”
`65.
`
`On January 18, 2022, Microsoft announced plans to acquire Activision Blizzard.
`
`Microsoft agreed to pay $68.7 billion ($68,700,000,000.00) in an all-cash transaction. Under the
`
`proposed terms of the merger, Microsoft would acquire all the outstanding stock of Activision
`
`Blizzard. Upon completion of the deal, Activision Blizzard would be wholly owned by Microsoft.
`66.
`
`The unlawful acquisition agreement requires Microsoft to pay Activision Blizzard
`
`a “reverse termination fee” if the merger is unable to proceed due to challenge under the
`
`antitrust laws. The agreement provides that Microsoft will pay Activision Blizzard a reverse
`
`termination fee of $2 billion if terminated prior to January 18, 2023, $2.5 billion if terminated
`
`after January 18, 2023, or $3 billion if terminated after April 18, 2023.
`
`Activision Blizzard
`67.
`
`Activision Blizzard, Inc. is a corporation incorporated under the laws of the State
`
`of Delaware with its headquarters and principal place of business in Santa Monica, California.
`68.
`
`Activision Blizzard is a video game developer, publisher, and distributor. It creates,
`
`publishes, and sells video games across multiple platforms, including Xbox, PlayStation,
`
`Windows and Apple PCs, and mobile devices.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`8
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 12 of 45
`
`
`
`69.
`
`Activision Blizzard has developed and published some of the most popular game
`
`franchises in history, such as Call of Duty, World of Warcraft, StarCraft, Overwatch, Diablo, and
`
`Candy Crush, among others.
`70.
`
`Activision’s Call of Duty franchise is considered to be one of the most successful
`
`and important gaming franchises in the console gaming market.
`71.
`
`Call of Duty is currently one of the largest game franchises by user base and
`
`revenue.
`72.
`
`Call of Duty has ranked in the top games available on a console for many years and
`
`has a high level of awareness amongst gamers and draws a large and loyal user base to the
`
`platforms on which it is played. It has been consistently successful for nearly a decade.
`73.
`
`There exist very few franchises that can be considered alternatives to Call of Duty
`
`or match its level of success.
`74.
`
`Activision Blizzard is one of the few game developers and publishers that can
`
`afford to invest the time, funding, and human resources required to develop and sustain a game
`
`franchise like Call of Duty or World of Warcraft.
`75.
`
`Activision Blizzard is currently considered the second largest video game
`
`publisher in the United States, with a market share of 10%, behind only Microsoft.
`76.
`
`There are only several independent game publishers in the world that are capable
`
`of making the highest production quality and most graphics-intensive video games that can be
`
`mass marketed and are highly anticipated among gamers (generally referred to as “AAA” or
`
`“Triple-A” games), including Activision Blizzard, Electronic Arts, Take-Two, and Ubisoft.
`
`Microsoft and Sony are also Triple-A game publishers.
`77.
`
`Activision Blizzard is also a video game distributor, selling its gaming content
`
`through its digital store front, www.battle.net.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`9
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 13 of 45
`
`
`
`Video Game Platforms
`78.
`
`Video games are developed and published for specific platforms that run the
`
`gaming content. Video game platforms are generally any system—a combination of hardware and
`
`software—that plays video game programs, or what is often referred to as “gaming content.”
`79.
`
`Video game platforms process and run the gaming content developed for the
`
`platform. Thus, all of the gaming content – the actual video games being played – come from the
`
`development of the gaming content, not from the platform. Without video games developed for a
`
`platform, a video game platform does not have any gaming content of its own.
`80.
`
`Video game platforms are generally divided into four major categories: console
`
`systems, personal computers, mobile devices, and cloud-based gaming services.
`a) Console Gaming
`81.
`
`Console systems are hardware devices that connect directly to a TV or monitor
`
`and allow users to play video games. The latest generation of consoles utilizing the latest
`
`technology are referred to as “next gen” consoles. Next gen consoles generally cost around $500.
`82.
`83.
`
`By using a console controller, a user plays games that are displayed typically on a
`
`The console itself provides the processing function for game play.
`
`television monitor.
`84.
`
`Only games specifically designed and engineered for that console will play on the
`
`console.
`85.
`
`Some large franchises offer cross-platform interoperability, where the game allows
`
`online play between players using different gaming consoles or platforms.
`86. Users must purchase the console system and must also purchase the gaming
`
`content designed for that console.
`87.
`
`For the past 20 years, there have only been three major manufacturers of gaming
`
`consoles. Microsoft makes Xbox consoles, including the most recent Xbox Series X and Series S.
`
`Sony Group Corporation (“Sony”) makes PlayStation consoles, including the most recent
`
`
`
`10
`COMPLAINT
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 14 of 45
`
`
`
`PlayStation 5. Nintendo Co. Ltd. (“Nintendo”), makes various console systems, including the
`
`most recent Nintendo Switch.
`88.
`
`Console manufacturers produce new generations of their consoles roughly every
`
`four to seven years. Each new generation of consoles generally features the latest technological
`
`advances in console gaming, and allows users to play ever more graphically and computationally
`
`advanced games.
`89.
`
`Game designers and engineers design games to make use of such increased
`
`processing power or new features.
`90. New games are ordinarily not backwards compatible with prior versions of
`
`consoles.
`91. Users must purchase the latest-generation consoles in order to play the newest and
`
`best games.
`92. Nintendo consoles, like the Nintendo Switch, are far less powerful than the
`
`Microsoft Xbox Series X or the Sony PS5. Thus, Microsoft and Sony are the only two producers
`
`of the high-performance segment of consoles that includes only the most technologically
`
`advanced consoles, which can run the most graphically and computationally complex games at
`
`the highest levels.
`93. Nintendo consoles and their games tend to cater to a younger and more casual
`
`gaming audience.
`94.
`
`As such, Xbox and PlayStation are much more similar and substitutable for one
`
`another, whereas Nintendo has largely carved out a niche that does not compete as heavily with
`
`Xbox or PlayStation.
`95. Most console games are developed in different versions to be played on different
`
`consoles. Individual games will often have both an Xbox version, compatible with an Xbox
`
`console, and a PlayStation version, compatible with a PlayStation console. Some games, however,
`
`are exclusive titles, only able to be played on an Xbox, PlayStation, PC, or Nintendo console and
`
`not the other systems.
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`
`
`11
`COMPLAINT
`
`
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 15 of 45
`
`
`
`b) PC Gaming
`
`96.
`
`Games can also be played on personal computers (“PC”),1 which provide the
`processing of gaming content.
`97. Most personal computers may be used to play video games. All personal
`
`computers can run some video games in addition to their other uses, however, only computers
`
`with sufficiently advanced graphical processors and other specifications are able to process and
`
`run the most graphically advanced and latest gaming content.
`98.
`
`Players utilizing a PC generally use their keyboard and mouse as opposed to a
`
`specifically designed controller.
`99.
`
`As the computing and graphics processing power of PCs increase, game
`
`developers and publishers design games to make use of increased processing power.
`100. Each video game is programmed for a specific computer operating system, and
`
`users purchase video games specifically programmed for the operating system of their personal
`
`computer.
`101. PC games are generally programmed for either the Windows operating system or
`
`Apple’s operating system, but gamers play on Windows PC much more than on Apple
`
`computers. Windows makes up roughly 90% of the PC gaming market.
`102.
`
`Just as with consoles, as PC technologies advance and more advanced video games
`
`are developed, users must occasionally upgrade the graphical and computational processing
`
`power of their PCs to play the most technologically advanced games.
`103. PCs are primarily used for personal and business functionality rather than playing
`
`video games.
`104. PCs are largely produced and marketed to consumers for use irrespective of their
`
`video-game-playing potential.
`
`
`1 Although the term “PC” means personal computer, the term “PC” is often used to mean
`specifically a Windows or non-Apple computer. This complaint uses the term PC to mean any
`computer, including Apple computers. However, given that roughly 90% of computer gaming
`occurs on Windows computers, the two meanings of the term are largely interchangeable with
`respect to PC-gaming
`
`
`
`12
`COMPLAINT
`
`
`
`1 2 3 4 5 6 7 8 9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 3:22-cv-08991-JCS Document 1 Filed 12/20/22 Page 16 of 45
`
`
`
`105. Similarly, the operating systems of PCs are primarily designed for broad
`
`functionality, and not solely for gaming.
`106. However, because of the popularity of gaming on PCs, the ability of the operating
`
`system and the hardware specifications of a PC to be able to run games is an important factor in
`
`consumer choice.
`107. Another important factor is the quality and quantity of the games programed for
`
`that type of device.
`108. Most console games are also developed to be played on personal computers.
`109. Most popular games can be purchased for use on a console (Microsoft Xbox or
`
`Sony PlayStation