EU gives green light to Microsoft’s $69 billion Activision Blizzard purchase

Microsoft’s acquisition of Activision Blizzard has been approved by EU regulators, a few weeks after the UK’s Competition and Markets Authority blocked it.

After an investigation into the deal, the biggest in video games history, The European Commission concluded that Microsoft would have ‘no incentive’ to refuse to distribute Activision’s games to Sony, it’s rival in the console space. Furthermore, even if Microsoft did decide to withdraw Activision’s games from Sony PlayStation, it ‘would not significantly harm competition in the consoles market.’

However it did say that Microsoft could harm competition in the ‘distribution of games via cloud game streaming services’ and that its position in the PC operating system market would be strengthened.

To address this we’re told Microsoft offered the following ten-year commitments:

These remedies not only fully address the competition concerns the Commission did have, but it goes further to say the deal would now ‘represent a significant improvement for cloud game streaming compared to the current situation.’

“Video games attract billions of users all over the world. In such a fast-growing and dynamic industry, it is crucial to protect competition and innovation,” said Margrethe Vestager, Executive Vice-President in charge of competition policy. “Our decision represents an important step in this direction, by bringing Activision’s popular games to many more devices and consumers than before thanks to cloud game streaming. The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, enhancing competition and opportunities for growth.”

While European regulators seem positively bullish about the deal, the UK’s CMA remains unmoved in its opposition to it. Last month it concluded that the combined force of Microsoft and Activision Blizzard would be able to dominate and restrict competition within the nascent cloud gaming market. It tweeted out the following response to the Commission’s clearing of the deal:

The UK, US and European competition authorities are unanimous that this merger would harm competition in cloud gaming. The CMA concluded that cloud gaming needs to continue as a free, competitive market to drive innovation and choice in this rapidly evolving sector.

Microsoft’s proposals, accepted by the European Commission today, would allow Microsoft to set the terms and conditions for this market for the next 10 years. They would replace a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale. 

This is one of the reasons the CMA’s independent panel group rejected Microsoft’s proposals and prevented this deal. While we recognise and respect that the European Commission is entitled to take a different view, the CMA stands by its decision.

It’s not just UK regulators who don’t like the look of the deal – in the US the Federal Trade Commission put out a press release in December saying that it is seeking to block the acquisition, as it ‘would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.’

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”

We won’t know until a hearing in August what the final US regulatory position will be, but that will be the big one since for one thing both firms are American. It’s not obvious what the next step is if regulators in different countries end up on such diametrically opposed positions – Europe now sound sounds enthusiastic about the deal, while the US very much does not. Presumably tit will involve lots of appeals, legal wrangling, and posturing statements whatever side of the fence the US and other countries ultimately land on.

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