The EU has cleared Microsoft’s $75bn purchase of Activision Blizzard. This is a break from the UK, which was blocking the largest gaming deal.
Margrethe Vestager said that Microsoft made concessions in order to ease its concerns. This included allowing European consumers to stream Activision games on any cloud game streaming provider for a period of 10 years.
The view of officials in Brussels on the cloud gaming industry was very different from that of their counterparts in the UK. In the UK, the Competition and Markets Authority had deemed Microsoft’s concessions as being insufficient in addressing fears about the deal cementing Microsoft’s dominance in the nascent market.
The EU stated that even if Microsoft decided to remove Activision games from the PlayStation it would not have a significant impact on the competition in the consoles markets, despite this being the main concern of US regulators.
Vestager said she was happy to reach a different conclusion than the US Federal Trade Commission or the CMA who argued that Microsoft could make Activision games exclusive to their cloud gaming service.
Vestager stated, “It’s important to me that we take ownership of this decision.” “We believe this is a good solution and we consider it pro-competitive.”
The EU’s decision clearing the transaction removes a major hurdle for Microsoft, Activision and Sony, who have stated that they are committed to the transaction, which would create the world’s third largest gaming company in terms of revenue, after China’s Tencent, and Japan’s Sony.
It is not clear how companies can overcome the objections from UK and US regulators.
Microsoft and Activision can only appeal the CMA decision on procedural grounds in the UK. The UK regulators are seeking significant remedies such as the forced sale of the Call of Duty Franchise, which the companies feel would make the deal unworkable.
James Groves of Fieldfisher said that the EU decision has no effect on the UK’s position regarding the deal.
Groves stated that it was unlikely for the merger to be successful at this time if it were to proceed in the EU only, excluding the US and UK. This would not be commercially feasible.
Bobby Kotick is the chief executive of Activision Blizzard. He said, “The European Commission conducted a very thorough and deliberate process in order to gain a complete understanding of gaming.”
Kotick, who had criticised the CMA decision and said that it was “clearly closed to business” in the UK, stated: “We intend meaningfully expanding our investment and workforce across the EU. . . “We expect these teams will grow and prosper, given the governments’ firm yet pragmatic approach to gaming.”
Sarah Cardell is the chief executive officer of the CMA. She said that the concessions made by Brussels will “allow Microsoft the right to set the conditions and terms for this market over the next 10 year.” The concessions would have replaced a market that was free, competitive and open with one that is subject to regulation. This includes the games Microsoft sells as well as the platforms on which they are sold.
Microsoft’s Brad Smith stated: “The European Commission required Microsoft to automatically license popular Activision Blizzard Games to competing cloud gaming service providers. This will be available globally, allowing millions of gamers to enjoy these games on their preferred devices.
Cardell continued: “We respect and acknowledge that the European Commission has the right to have a different opinion, but the CMA is standing by its decision.”
The EU’s decision came despite the opposition of other groups. Specifically, Sony of Japan, who accused Microsoft of misleading regulators about its promises of giving Call of Duty access to other platforms. The EU agreed with UK authorities, that Sony’s PlayStation was the dominant console in the market and therefore there were no concerns about competition.
Microsoft has signed licensing agreements with cloud gaming platforms, including Nvidia’s GeForce Now. It has also committed to extend the same rights to future companies who launch rival services over the next decade.
Activision Blizzard does not offer any games on cloud platforms. The European Commission hopes the proposal will increase competition in a part of the market that one official described as “very small” but “growing”, and “innovative”.
Antitrust authorities are scrutinizing Big Tech deals more closely around the globe. The regulators want to send a signal that the technology party is over, said a regulatory in reference to UK blocking the deal.
Vestager stated that the investigation focused on the cloud gaming aspect of the deal, dismissing any concerns regarding harm to the console market. Microsoft’s decision to remove Call of Duty was deemed too damaging to Activision, as the PlayStation consoles outsell Xbox by four to one on the European market.
The CMA’s final decision stated that Microsoft’s cloud gaming market share was between 60 and 70 percent. This included subscribers to Microsoft Game Pass who did not use the cloud gaming capabilities of the service.
The official stated that “it’s not for us a separate market. It’s just a segment within the
market.”
Microsoft and Activision Blizzard now have to defeat US and UK regulators at the courts in order to proceed with the deal. Both companies in the UK have hired top-notch barristers who will argue their case before the Competition Appeal Tribunal. The tribunal will analyse the CMA’s procedures for making decisions to determine if the decision is lawful.
The FTC continues to focus on consoles in the US case despite the UK and EU concluding that Sony’s risk from the deal was limited due to the PlayStation’s dominance of the market.