US approval and a successful appeal of the CMA’s recent prohibition would still be needed to get the deal through
EC’s Phase II review reveals the potential harm to competition: On 15 May 2023, the EC approved the acquisition of Activision Blizzard by Microsoft. This concludes an in-depth investigation into the proposed transaction, with the EC emphasising that its decision is based on “hard evidence”, “extensive information” and feedback from competitors and customers. The EC’s Phase II review found that:
Microsoft would have no incentive to refuse to distribute Activision's games to Sony, the leading distributor of console games worldwide;
Even if Microsoft did withdraw Activision's games from the PlayStation, this would not significantly harm competition in the consoles market;
Even without this transaction, Activision would not have made its games available for multi-game subscription services;
The acquisition would harm competition in the distribution of PC and console games via cloud gaming services; and
Exclusivity could enable Microsoft to strengthen the position of Windows in the market for PC operating systems.
Commitments required to achieve positive outcomes for consumers: In response to the competition concerns identified, Microsoft offered the following licensing commitments, with a 10-year duration:
A free licence to consumers in the European Economic Area (EEA) that would allow them to stream, via any cloud gaming service, all current and future Activision Blizzard PC and console games for which they have a licence; and
A corresponding free licence to cloud gaming service providers to allow EEA-based gamers to stream any Activision Blizzard's PC and console games.
In the EC’s view, these commitments (on which market participants have shown interest and given positive feedback) fully address its competition concerns. They represent a significant improvement for cloud gaming compared to the current situation, empowering millions of EEA consumers, bringing Activision’s games to new platforms and devices, and boosting the development of a dynamic technology across the region.
To complete, the acquisition requires regulatory approval in the EU, UK and US: The EC’s decision is conditional on Microsoft’s full compliance with the commitments, with an independent trustee set to be in charge of monitoring their implementation. That said, full clearance of the deal also hinges on the tech giant successfully appealing the CMA’s prohibition announced last month, as well as securing regulatory approval in the US, where the Federal Trade Commission (FTC) is suing to block it. According to Margrethe Vestager (Executive Vice-President, EC), the EU’s clearance of the transaction, as modified by the commitments, would drive competition and opportunities for growth in a fast-growing sector. While this may offer Microsoft a glimmer of hope, it could yet be forced to abandon the acquisition if it cannot overturn the CMA’s prohibition. The CMA and EC shared a lot of the same analysis about the deal, but ended up in different places. The CMA stands by its decision, stating that the EC is allowing Microsoft to “set the terms and conditions for this market for the next 10 years”. With the CMA winning around two-third of appeals since 2010, and without a third way, it could soon be game over.
