The European Commission (EC) has given the go-ahead to Microsoft’s proposed $68.7 billion bid for gaming giant Activision.
The news comes a few weeks after the U.K. emerged as the first jurisdiction to block the megabucks deal, while the Federal Trade Commission (FTC) in the U.S. is suing to block the deal.
Europe had been mulling an in-depth probe for some time, confirming back in November that it was concerned that the coming together of Microsoft and Activision could reduce competition in both the console and PC video game market. The EC had set a deadline of 25th April to announce a decision, but it pushed its decision back after receiving further remedies and commitments from Microsoft. It was widely expected that the deal would be rubberstamped today, and that has now been confirmed, with the EC’s final report noting that the approval is “conditional on full compliance with the commitments offered by Microsoft.”
The story so far
Microsoft first tabled its bid for Activision in January last year, a deal that sought to combine Microsoft’s distribution might in the console and PC realm with one of the largest third-party game publishers in the world — Activision is responsible for mega-franchises such as Call of Duty and World of Warcraft. With Activision under its wing, Microsoft would effectively become the third-biggest gaming company in the world by revenue, behind Tencent and Sony.
At the heart of antitrust legislators’ concerns is that Microsoft would have too much clout and control over the distribution of games, vis-à-vis it would have the incentive to either withhold popular gaming titles from rival gaming platforms, or otherwise create a lesser playing experience on alternatives to encourage people to switch to its ecosystem which includes Xbox and Windows.
While the U.K. had previously focused on the deal’s impact in both console and cloud gaming, the Competition and Markets Authority (CMA) narrowed its case to the latter only. It said that while Microsoft could conceivably withhold games from PlayStation, Sony’s console had sufficient market share that meant this would likely remain a profitable and attractive conduit for Microsoft to continue supporting with Activision games. With cloud gaming, though, it said that the proliferation of Windows and its “significant cloud infrastructure” could give Microsoft an unfair advantage.
It’s worth noting that Microsoft has made numerous commitments to keep Activision games on rival platforms including Sony, Nintendo, and Nvidia, for a 10-year period. However, the CMA argued that Microsoft’s proposals wouldn’t replace existing “competitive dynamism.”
In the wake of the U.K.’s blockade, both companies came out aggressively, with an Activision spokesperson saying at the time that the U.K.’s conclusions “are a disservice to U.K. citizens, who face increasingly dire economic prospects,” adding that it would “reassess” its growth plans for the U.K. due to it being “closed for business.”
While Europe has been a fairly active party in holding big tech companies’ to account for anti-competitive malpractice, it has never been a major proponent of stonewalling mergers and acquisitions in the tech world outside of the telecoms industry. So today’s findings are pretty much in keeping with previous form.
Similar to the U.K., the EC said that it was less concerned with console gaming than it was with cloud-based game streaming services, and that if Microsoft were to make Activision games exclusive to its own streaming service — Game Pass Ultimate — it could reduce competition in what is still effectively a nascent market. Moreover, limiting access to its own streaming service could also strengthen its existing PC market share.
Microsoft’s proposed remedies, which included the promise to allow all consumers in the European Economic Area (EEA) to stream all current and future Activision games via any cloud-based game streaming service for the next 10 years, were apparently sufficient to garner Microsoft the greenlight.
The EC’s decision follows a couple of months after Japan also approved the deal, though Europe has made it clear that it intends to implement checks on how Microsoft’s actions impact rival gaming companies in the future. It said that an “independent trustee” will be in charge of monitoring Microsoft’s implementation of its commitments.