Microsoft and Activision Blizzard

Microsoft’s planned takeover of Activision Blizzard stands to be the largest concentration in the gaming sector – if not the entertainment industry as a whole, as some would have it. Activision is the creator and publisher of PC and console games such as Call of Duty, World of Warcraft or Diablo. Microsoft is a gaming powerhouse in its own right; apart from having its own games catalogue, it also – an important point in this case – has its own gaming ecosystem built around the Xbox console. One of the worries which the deal stirred up was that Microsoft, once it acquires Activision Blizzard, might move to pull major Activision titles from the PlayStation console made by Sony.

Before it can move to finalise the deal, Microsoft must obtain antitrust clearance in a number of jurisdictions. In the event, this went smoothly enough in Japan (which, of course, is the homeland of Sony). Proceedings before the European Commission, meanwhile, proceeded to the second phase after their initiation in January 2022, and were concluded only recently – with a conditional decision, in which the European Commission noted that “Microsoft would have no motivation to refuse distribution of Activision games for Sony, the latter being a leading distributor of console games the world over, including the European Economic Area where, for every Microsoft Xbox console, gamers buy four Sony PlayStation consoles. Microsoft would have a strong motivation to continue distributing Activision games via a platform as popular as the Sony PlayStation”. What does give the Commission pause, however, is the issue of distribution of PC and console games via cloud streaming services, in that Microsoft might offer Activision titles only through Microsoft streaming services. At the same time, the European Commission notes that the entire market is a developing one, and that the transaction may trigger a growth spurt. In order to prevent potential distortion in the market, the Commission is obligating Microsoft to grant a free 10-year license to entities offering game streaming services within the European Economic Area.

It should be mentioned that, in late April, the British Competition and Markets Authority declined its permission for the tie-up altogether, on the grounds that it might restrict innovation in the game streaming market (famously moving an Activision representative to remark that “the UK is clearly closed for business”). The CMA fears that, if the transaction is allowed to go ahead, Microsoft will withhold popular Activision titles from competing providers of streaming services.

Despite the American lineage of the protagonists, the transaction did not exactly breeze through the antitrust checkpoints in the United States. Microsoft’s takeover of Activision has come under the scrutiny of the Federal Trade Commission, and concerned gamers filed a private antitrust lawsuit challenging the deal with a federal court in San Francisco.

Even if you have difficulty differentiating your Black Ops from your Mario Bros, this is more than an ordinary corporate tie-up, and it promises to bring interesting developments in the future. To mention only the British aspect, Reuters reports that Microsoft will be appealing the CMA decision; the case may last years, but will be watched closely by the legal and business communities.

More broadly, one may wonder whether the more accommodating position of the European Commission will do anything to influence the outlook of the other competent authorities, at least as regards the conditions. The upcoming full text of the Commission’s decision promises to be a captivating read.