The deal was initially proposed at a value of around $68 billion, encompassing the acquisition of Activision, Blizzard Entertainment and King. IPs involved therefore include Call of Duty, Guitar Hero, Overwatch and Candy Crush. The sheer scale of this deal is remarkable – if completed, it would officially be deemed the largest videogame industry acquisition in history (by some margin, too). As such, it immediately gained the attention of regulators (as well as the press and stakeholders in the videogame industry) worldwide.
While the deal was initially approved in a few jurisdictions (Brazil, Saudi Arabia, Chile and Serbia), it immediately drew heat from the European Commission, the US Federal Trade Commission (FTC) and the UK Competition and Markets Authority (CMA). The primary concern is a potential antitrust legality issue – with Microsoft securing a potential monopoly on the videogame industry (which, as monopolies do, likely leads to a less competitive market and therefore a worse deal for consumers).
For context, Microsoft already holds an established place in the videogame industry (Xbox is the most obvious example), with significant footholds in both software and hardware. Microsoft had already acquired Bethesda (publisher of the Fallout series) in 2021, and has been criticised numerous times in the past for supposedly anti-competitive business practices. Activision Blizzard is, as already outlined, a hugely successful videogame publisher (annual revenues of over $8 billion) with a large number of popular IPs. Most regulators viewing the acquisition with suspicion are citing Sony as the next biggest competitor (in other words, the competition which they feel may be too greatly weakened if this deal was to go through).
In the US, the FTC (having already expressed concerns over the growing dominance of the Big Tech sector in recent years) was immediately alerted to a potential antitrust concern by senators including Elizabeth Warren and Bernie Sanders. In December 2022, the FTC expressed its intention to block the acquisition. Concerns particularly centre on cloud gaming, where the FTC feels Microsoft may limit the ability of consumers to play cross-platform and multiplayer games, with a close eye on its in-house exclusive ‘Game Pass’ subscription (a concern which Microsoft has attempted to dismiss numerous times). The ongoing court case is heating up, with Microsoft even going as far as to challenge the constitutionality of the FTC itself (which they have now backed down from).
The European Commission have been investigating the potential acquisition (under EU merger law) since September 2022, and expect to release their verdict next month (April 2023). As with the FTC, European regulators are particularly concerned about the potential for the acquisition to result in Microsoft limiting the cross-platform functionality and accessibility of a number of its titles. Microsoft responded in February 2023 by arguing their decision to make Call of Duty available on Nintendo consoles clearly demonstrated that they do not hold such intentions.
Over in the UK, the CMA announced its intention to investigate the deal early on (August 2022). The first phase of the ruling took just a month and immediately expressed concerns. In February 2023 they doubled down, stating that the acquisition ‘may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom’ – the ultimate concern of any antitrust regulator. However, the same Call of Duty-Nintendo announcement that Microsoft attempted to calm the European Commission with has gone down rather well with the CMA, who feel this demonstrates a genuine willingness to avoid a monopoly (noting specifically that the move represents a major economic loss for Microsoft). Now, in late March 2023, the CMA has dropped another major concern regarding the hardware ramifications of the deal (relating to a monopoly on consoles), at which point Activision Blizzard shares rose 5%. The full report releases next month (April 2023).
In short, the proposed acquisition has caused a great deal of regulatory concern regarding issues of anti-trust and monopoly creation. The FTC remains the most difficult hurdle for Microsoft to overcome (in comparison with EU and UK regulators, who seem more likely to soften their position). Lawyers (or aspiring lawyers) in fields such as M&A, antitrust and technology (or specifically the niche but exciting area of gaming law) will be monitoring this constantly evolving story in the coming months, when the fate of the largest videogame acquisition in history will ultimately be decided.
By Declan Peters
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