Potential Obstacles for Microsoft’s $69 Billion Acquisition of Activision

Following the rejection of a comparable request by a federal judge, the U.S. Federal Trade Commission has sought the intervention of an appeals court to temporarily halt Microsoft’s $69 billion purchase of video game producer Activision Blizzard.

Regulatory authorities react to the trade in different parts of the world.

WHAT IS THE ACTIVISION AGREEMENT?

In January of last year, Microsoft announced Activision’s bid to increase its firepower in the booming video game market, take the lead from Tencent and Sony, and lay the groundwork for its investments in metaverse and digital spaces made more alive by the use of virtual reality (VR) or augmented reality (AR).

Microsoft, which owns Xbox, said in February it was willing to offer licensing deals to its rivals to crack down on antitrust, but it would not sell Activision’s lucrative “Call of Duty” franchise.

WHAT DO THE TRUST REGULATIONS SAY?

Britain’s competition authority, which blocked the deal in April, took a U-turn after a federal judge rejected the FTC’s request to halt the deal.

Britain’s Competition and Markets Authority said a restructuring between the two US companies could satisfy its concerns, based on a new investigation. The CMA extended the deadline for making a decision until August 29.

The US Competition Authority and the UK Competition and Markets Authority are concerned about the deal.

The FTC says the deal could allow Microsoft to undermine the quality of Activision’s games or the player experience on competing consoles, such as Nintendo consoles and Sony Group Corp’s PlayStation, manipulate pricing or change the terms or conditions of use of Activision content.

The UK’s CMA suspended the deal due to anti-competitive concerns about cloud gaming, which it called an “emerging and exciting market” because it allows users to play on any device.

“Cloud gaming is growing rapidly and has the potential to transform gaming… freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice about how and where they play games,” said CMA panel chair Martin Coleman.

However, EU competition authorities approved the deal in May, and the European Commission said the remedies offered by Microsoft resolved their concerns.

WHO ARE THE AGREEMENT’S CRITICS AND FANS?

Market leader Sony wants to block the deal. A group of ten players from the United States has filed a private consumer antitrust lawsuit against the store. But Microsoft in May defeated a bid by gamers to block the deal.

The European Games Development Federation, which has more than 2,500 game studios in 22 European countries, and UNI Global Union are supporting the acquisition.

Nvidia also announced its support for the deal.

WHAT HAS THE MICROSOFT PRESIDENT SAID AND OFFERED?

Microsoft president Brad Smith said he “doesn’t think it’s possible or realistic to think that one game or one part of this company (Activision) can be cut and separated.”

Smith criticized Britain after the CMA’s veto in April, saying it would undermine confidence in the UK as a technology destination, after the company called the UK regulator an “outlier” for blocking trade.

Bloomberg News reports that the two companies are considering giving up some control of their cloud gaming business in the UK to appease regulators so they can complete their merger.

WHAT ARE NINTENDO’S AND NVIDIA’S LICENSE OFFERS?

Both companies have signed 10-year licensing agreements that will bring Call of Duty to their gaming platforms if the Activision deal is approved.

Spanish Nware also signed a 10-year contract to bring Xbox and Activision Blizzard games to the Spanish cloud gaming platform.

DOES MICROSOFT’S TACTICS WORK?

Antitrust experts say the FTC faces an uphill battle to get a judge to block the deal because of the voluntary concessions offered by Microsoft.

Behavioral remedies such as licensing agreements are rarely enough for the CMA, which flexed its muscles in 2021 when it ordered Facebook owner Meta to sell the animated images platform after the Giphy deal closed.

WHO HAS GIVEN THE GREEN LIGHT AGAIN?

Brazil, Chile, Serbia and Saudi Arabia have given unconditional approval.

WHAT NEXT?

After a US judge gave the thumbs up to the deal, Smith said the focus would be on looking at how the deal could be changed to address the CMA’s concerns.

Microsoft said the company would reject the FTC’s complaint after the U.S. regulator failed to prove the deal was illegal under antitrust laws in federal court in San Francisco.