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Indebta > News > EU clears Microsoft-Activision deal despite UK’s decision to block acquisition
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EU clears Microsoft-Activision deal despite UK’s decision to block acquisition

News Room
Last updated: 2023/05/15 at 11:28 AM
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EU regulators have cleared Microsoft’s $75bn acquisition of Activision Blizzard, breaking from the UK and US which are holding up the gaming industry’s biggest-ever deal.

Margrethe Vestager, the EU’s competition chief, said on Monday that Microsoft had made a series of concessions to alleviate its concerns, including allowing all European consumers who purchase an existing or future Activision game to stream it on all cloud game streaming providers for 10 years.

Officials in Brussels took a sharply different view on the cloud gaming market to their peers in the UK, where the Competition and Markets Authority had deemed Microsoft’s concessions insufficient to address fears that the deal would cement its dominance of the nascent industry.

“Even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the consoles market,” the EU said in a statement, despite that issue being the focus of US regulators’ concerns.

Vestager added she was comfortable with arriving at a different conclusion to the US Federal Trade Commission and the CMA, which has argued that Microsoft might make Activision’s games exclusive to its own cloud gaming service.

“I think it’s really important that we own this decision,” said Vestager. “We think this is a good remedy and we think it’s pro-competitive.”

The EU’s decision to clear the transaction removes an important hurdle for Microsoft and Activision, which have said they remain committed to a transaction that would create the third-biggest gaming company by revenue, behind China’s Tencent and Japan’s Sony.

However, it remains unclear how the companies will be able to overcome the objections of UK and US regulators.

In the UK, Microsoft and Activision are appealing the CMA’s decision, but can only do so on procedural grounds. UK regulators have sought significant remedies, such as forcing the sale of the Call of Duty franchise, a move that the companies believe would render the deal unworkable.

“All options are on the table,” said a person with direct knowledge of Microsoft’s thinking.

Microsoft president Brad Smith said: “The European Commission has required Microsoft to license popular Activision Blizzard games automatically to competing cloud gaming services. This will apply globally and will empower millions of consumers worldwide to play these games on any device they choose.”

“The EC conducted an extremely thorough, deliberate process to gain a comprehensive understanding of gaming,” said Bobby Kotick, Activision Blizzard’s chief executive.

After criticising the CMA’s decision and suggesting it showed the UK was “clearly closed for business”, Kotick said: “We intend to meaningfully expand our investment and workforce throughout the EU . . . We expect these teams to grow and prosper given their governments’ firm but pragmatic approach to gaming.”

The EU decision comes despite opposition from other groups, mainly Japan’s Sony, who accused Microsoft of misleading regulators of its promises to give access to Call of Duty to other platforms. The EU did agree with UK authorities that the dominance of Sony’s PlayStation removed any competition concerns from the deal in the console market.

Microsoft has already struck licensing deals with cloud games platforms including Nvidia’s GeForce Now and has committed to extending the same rights to any future companies that launch a rival service over the next decade.

No games made by Activision Blizzard are available on cloud platforms, so the European Commission hopes that the proposal will boost competition in what one official called a “very limited” but “growing” and “innovative” part of the market.

The move comes as antitrust authorities around the world provide tougher scrutiny of Big Tech deals. “Regulators want to send the signal that the tech party is over,” said a regulator in reference to the UK blocking the deal earlier.

Vestager said the main focus of its investigation was on the impact of the deal in cloud gaming, after dismissing concerns about potential harms to the console market. The EU determined that it would be too detrimental to Activision’s profits for Microsoft to pull Call of Duty from PlayStation consoles, which outsell Xbox four to one in the European market.

One EU official suggested that the CMA had “overstated” Microsoft’s share of the cloud game streaming market, suggesting that the 60 to 70 per cent estimate stated by the UK regulator in its final ruling included many subscribers to Microsoft’s Game Pass subscription service who do not actually use the cloud gaming features of the product.

“For us, it’s not a separate market, it’s a segment of the overall market,” the official said.

To proceed with the deal, Microsoft and Activision Blizzard must now defeat US and UK regulators in the courts. In the UK, both companies have hired top barristers to argue their case at the Competition Appeal Tribunal, which will determine whether the CMA’s decision was lawful by analysing the agency’s decision-making procedures.

In the US case, the FTC’s arguments remain focused on consoles, despite both the UK and now EU determining that the risk to Sony from the deal is limited given the PlayStation’s dominant market share.

Read the full article here

News Room May 15, 2023 May 15, 2023
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