What You Missed This Week in Video Games

Epic Games must pay $520M to resolve FTC allegations

"Game On" is The Fly’s weekly recap of the stories powering up or beating down video game stocks.

EPIC/FTC: On Monday, the Federal Trade Commission said it secured agreements requiring "Fortnite" creator Epic Games to pay a total of $520M in relief over allegations the company violated the Children’s Online Privacy Protection Act and deployed design tricks, known as dark patterns, to dupe millions of players into making unintentional purchases. The FTC’s action against Epic involves two separate record-breaking settlements. As part of a proposed federal court order filed by the Department of Justice on behalf of the FTC, Epic will pay a $275M monetary penalty for violating the COPPA Rule-the largest penalty ever obtained for violating an FTC rule. Additionally, in a first-of-its-kind provision, Epic will be required to adopt strong privacy default settings for children and teens, ensuring that voice and text communications are turned off by default. Under a separate proposed administrative order, Epic will pay $245M to refund consumers for its dark patterns and billing practices, which is the FTC’s largest refund amount in a gaming case, and its largest administrative order in history. Investors in Epic Games include Tencent (TCEHY), KKR (KKR), Disney (DIS), and Sony (SONY).

MICROSOFT/FTC: Microsoft (MSFT) has signaled it plans to challenge the Federal Trade Commission’s lawsuit to block its proposed $69B deal for Activision Blizzard (ATVI), and is expected to argue that it is an underdog in videogame developing, The Wall Street Journal’s Sarah E. Needleman reported over the weekend. Legal experts say Microsoft will likely build its case around those talking points as well as the fact that it is pursuing what is called a vertical merger, meaning it is buying a company in its supply chain as opposed to a direct competitor, the author noted. The deal “is fundamentally good for gamers, good for consumers, good for game developers and good for competition,” said Brad Smith, Microsoft’s president and vice chair, at the company’s annual shareholders meeting last week. “We will have to present this case to a judge in a court because this is a case in which I have great confidence.”

ACTIVISION COO: Activision Blizzard said in a regulatory filing last week that president and COO Daniel Alegre notified the game maker that he intends to leave for another opportunity upon completion of the current term of his employment under his employment agreement with the company, which term expires on March 31, 2023. Following the news, Bloomberg’s Lisa Du reported that Alegre will take on the role of CEO at Yuga Labs, a blockchain startup behind the Bored Ape Yacht Club collection of NFTs. Alegre will assume the position in the first half of 2023, Du noted.

OTHER STORIES TO WATCH:

• Amazon (AMZN) reached a deal with Embracer’s (THQQF) Crystal Dynamics to publish a new "Tomb Raider" game [more]
• Sony (SONY) said that upcoming PlayStation 5 game "Marvel’s Spider-Man 2" will launch fall 2023 [more]
• Sony’s Guerrilla Games said it is working on a new "Horizon" multiplayer game [more]
• Amazon Prime has greenlit a TV series based on PlayStation franchise "God of War," THR reports [more]

Keywords: video games, game on, activision blizzard, epic games, fortnite, ftc, microsoft