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EU approves Microsoft-Activision deal despite UK decision to block acquisition


EU regulators have cleared Microsoft’s $75 billion acquisition of Activision Blizzard, breaking away from the UK and US, which are blocking the gaming industry’s biggest-ever deal.

Margrethe Vestager, the EU’s competition chief, said on Monday that Microsoft had made a number of concessions to ease her concerns, including allowing all European consumers who buy an existing or future product activision game to stream it on all cloud game streaming providers for 10 years.

Officials in Brussels have expressed a markedly different view of the cloud gaming market than their colleagues in the UK, where the Competition and Markets Authority had considered the concessions of Microsoft insufficient to address fears that the deal would consolidate its dominance over the fledgling industry.

“Although Microsoft has decided to withdraw Activision’s games from the PlayStation, this would not significantly harm competition in the console market,” the EU said in a statement, despite the fact that this issue is at the heart of US regulators’ concerns.

Vestager added that he is comfortable coming to a different conclusion for the US Federal Trade Commission and the CMA, who have argued that Microsoft could make Activision’s games exclusive to its own cloud gaming service.

“I think it’s really important that this decision belongs to us,” Vestager said. “We think this is a good remedy and we think it’s pro-competitive.”

The EU’s decision to clear the transaction removes a major hurdle for Microsoft and Activision, which said they remained committed to a transaction that would create the third-largest games company by revenue, behind China’s Tencent and Japan’s Sony.

However, it is unclear how the companies will be able to overcome objections from UK and US regulators.

In the UK, Microsoft and Activision are appealing the CMA’s decision, but can only do so on procedural grounds. UK regulators have sought significant remedies, such as forcing the sale of the call of Duty franchise, a move the companies believe would render the deal unworkable.

James Groves, a regulatory lawyer at the Fieldfisher firm, said the EU’s decision had no effect on the deal’s position in the UK.

“For the merger to proceed at the moment, it would have to somehow go ahead in the EU alone, carving out the US and the UK, and that seems extremely unlikely to be commercially viable,” Groves said.

“EC has conducted an extremely thorough and deliberate process to gain a complete understanding of the game,” said Bobby Kotick, chief executive officer of Activision Blizzard.

After criticizing the CMA’s decision and suggesting it showed the UK was ‘clearly closed for business’, Kotick said: ‘We intend to significantly expand our investment and workforce across the EU. . . We expect these teams to grow and thrive, given their governments’ firm but pragmatic approach to the game.”

Sarah Cardell, chief executive of the CMA, said that the concessions accepted by Brussels “will allow Microsoft to set the terms and conditions for this market for the next ten years. They would replace a free, open and competitive marketplace with one subject to ongoing regulation of the games Microsoft sells, the platforms it sells to, and the terms of sale.”

Microsoft President Brad Smith said: “The European Commission has requested Microsoft to automatically license popular Activision Blizzard games to competing cloud gaming services. This will apply globally and enable millions of consumers around the world to play these games on any device they choose.”

He added: “Although we recognize and respect that the European Commission has the right to take a different point of view, the CMA stands by its decision.”

The EU’s decision comes despite opposition from other groups, mainly Japan’s Sony, which has accused Microsoft of misleading regulators of its promises to give access to call of Duty to other platforms. The EU has agreed with the UK authorities that the dominance of Sony’s PlayStation has eliminated any competition concerns from the deal in the console market.

Microsoft has already struck licensing deals with cloud gaming platforms including Nvidia’s GeForce Now, and has pledged to extend the same rights to any future companies that launch a rival service over the next decade.

No games made by Activision Blizzard are available on cloud platforms, so the European Commission hopes the proposal will increase competition in what one official called a “very small” but “growing” and “innovative” part of the market.

The move comes as antitrust authorities around the world provide tougher scrutiny of Big Tech deals. “Regulators want to send a signal that the tech party is over,” said one regulator in reference to the UK’s earlier blocking of the deal.

Vestager said the main focus of its investigation was the deal’s impact in cloud gaming, after dismissing concerns about potential harm to the console market. The EU ruled it would be too bad for Activision’s bottom line for Microsoft to pull it call of Duty by PlayStation consoles, which outnumber Xbox sales in the European market by four to one.

An EU official suggested the CMA had “overestimated” Microsoft’s share of the cloud game streaming market, suggesting that the 60-70% estimate the UK regulator claimed in its final ruling included many subscribers to Microsoft’s Game Pass subscription service who don’t actually use the product’s cloud gaming features.

“For us it is not a separate market, it is a segment of the total market,” the official said.

To move forward with the deal, Microsoft and Activision Blizzard must now defeat US and UK regulators in the courts. In the UK, both companies have hired top lawyers to argue their case in the Competition Appeal Tribunal, which will determine whether the CMA’s decision was lawful by analyzing the agency’s decision-making procedures.

In the case of the US, the FTC’s arguments remain focused on consoles, despite both the UK and now the EU having determined that the risk to Sony from the deal is limited given PlayStation’s dominant market share.


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