The time has come for Microsoft and Activision. The verdict of the European Commission has just fallen, and the European body of regulation of competition approves the acquisition. The Commission believes that Microsoft’s commitments “will bring significant benefits for competition”.
Europe validates the takeover of Activision, finally good news for Xbox
Even if several world jurisdictions decide on the subject, three large authorities were especially awaited by Microsoft to launch the effective acquisition of Activision Blizzard King.
- The FTC, a US agency, disapproved of the takeover on December 8, 2022
- The CMA, a British body, disapproved of the takeover on April 26, 2023
- The EC, a European body, approved the takeover on May 11, 2023
The European Commission therefore considers that there is no risk for competition if Microsoft offers Activision Blizzard King. In its argument, the organization explains that the authorization is subject to full compliance with the commitments proposed by Microsoft. “These commitments fully address the competition concerns identified by the Commission and represent a significant improvement for cloud gaming compared to the current situation,” the report states.
Today’s decision follows a thorough investigation into Microsoft’s proposed acquisition of Activision. As always, the Commission based its decision on hard evidence and extensive information and feedback from competitors and customers, including game developers and distributors, as well as cloud game streaming platforms in the EU. .
EU details Microsoft concessions
In order to address the competition concerns raised by the Commission in the market for the distribution of PC and console games through cloud game streaming services, Microsoft has offered the following global licensing commitments for a duration of 10 years :
- A free license granted to consumers in the EEA (European Economic Area, editor’s note), allowing them to stream, using the cloud game streaming service of their choice, all current and future Activision Blizzard games for PC and for consoles for which they have a license;
- A matching free license granted to cloud game streaming service providers, to allow gamers based in the EEA to stream all Activision Blizzard games for PC and consoles.
These commitments fully address the competition concerns raised by the Commission and represent a significant improvement for cloud game streaming compared to the current situation.
They will enable millions of consumers in the EEA to stream Activision games using any cloud gaming service in the EEA, as long as those games are purchased from an online store or are included in an active multi-game subscription in the EEA.
Additionally, the availability of popular Activision games to all cloud game streaming services for streaming purposes will drive the development of this dynamic technology in the EEA. Ultimately, the Commitments will deliver significant benefits for competition and consumers, making Activision’s games available to new platforms, including smaller players in the EU, and making them accessible to more devices than before.
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In view of market reactions, the Commission concluded that the proposed acquisition, as modified by the commitments, would no longer raise competition concerns and would ultimately bring significant benefits for competition and consumers. The Commission’s decision is subject to full compliance with the commitments entered into. Under the supervision of the Commission, an independent trustee will be responsible for monitoring their implementation.
What do the FTC and the CMA accuse Microsoft of?
The FTC fears that Microsoft is becoming too powerful in the console market
In the United States, Microsoft has already announced that it would go all the way, even if it means defending itself in federal court to show that there is no risk for competition with this takeover. The FTC’s objections relate to a risk that Microsoft will become too powerful with this takeover.
The agency said the Xbox maker would gain control of leading video game franchises, allowing it to harm competition in high-performance game consoles and subscription services by refusing or by degrading its rivals’ access to its popular content.
The CMA fears for the cloud gaming market
In the United Kingdom, the arguments are quite different. After investigations, the CMA had explained that competition in the world of consoles was not threatened. She admitted that making Call of Duty exclusive to Xbox wouldn’t make sense for Microsoft, as it would also deprive the company of significant revenue from PlayStation sales and royalties.
In its argument, the CMA rather mentioned the Cloud as the reason for the blockage, considering that this high-potential market would be greatly disrupted with the consolidation of a player as powerful as that of Microsoft-Activision-Blizzard-King and their multiple franchises. to success. The CMA recalled that Microsoft already represented, according to estimates, 60% to 70% of the Cloud Gaming market and had other important assets in the field of video games, such as its Xbox consoles, the Windows OS and its Azure platform. .
What will happen next?
With this agreement from Europe to continue the operation, Microsoft now has a fairly considerable asset for the rest of its actions. With a blockade from the US and UK, the company is clearly in trouble, but all is not yet lost for Microsoft, and today’s news will allow it to make a new case. in favor of redemption.
Microsoft plans to go to court to defend itself in the US, and is appealing the CMA’s decision in the UK. On this last point, we have also learned that Microsoft and Activision-Blizzard had hired the services of Lord David Pannick, a lawyer who notably worked for Queen Elizabeth II, Prime Minister Boris Johnson, the former director general of the BBC Mark Thompson, or Manchester City Football Club. This lawyer specializing in large cases is clearly an asset for Microsoft.
When we look at the arguments of the FTC and the CMA, as well as the proposals made by Microsoft to expand the market with this acquisition, it seems quite clear that the American company is likely to win some legal battles.
As detailed on Xboxygen recently, several experts have spoken on the subject and two of them believe that Microsoft’s appeal against the CMA’s decision is unlikely to succeed. Microsoft’s attorneys will then have to find a procedural error in the CMA’s review process or prove that the CMA acted “irrationally.” Microsoft could probably go further, but all this costs money and time, in addition to slowing down the company’s day-to-day operations.
According to DFC Intelligence, the question is how far Microsoft is willing to compromise to get the deal approved. DFC now thinks that the CMA might require Microsoft to deliver more than it is willing to give. “There is a growing risk that Microsoft will back out of the takeover.”
If Microsoft deems it has gone far enough without succeeding in convincing more, the company could then abandon the takeover and look into other acquisitions to continue its quest for exclusive games to provide its catalog, and in particular the Xbox Game Pass subscription.
