The EU Commission approved Microsoft’s US$68.7 billion acquisition of gaming studio Activision Blizzard, a month after the UK’s Competition and Markets Authority (CMA) ruled against the deal.
While the Commission said it was reassured that the commitments offered by Microsoft “fully address the competition concerns identified by the Commission,” the approval is conditional on full compliance with the commitments. An independent trustee under supervision of the Commission will be in charge of monitoring their implementation.
“As always, the Commission has based its decision on hard evidence, and on extensive information and feedback from competitors and customers, including from game developers and distributors as well as cloud game streaming platforms in the EU,” a statement on the Commission’s website read.
Microsoft first announced its intention to buy Activision in January 2022, leading to the CMA, the European Commission, and the US Federal Trade Commission (FTC) to launch antitrust probes, citing concerns about limiting competition in the gaming market.
During its preliminary investigation, the Commission said that while it was unlikely Microsoft would be able to harm rival consoles and multigame subscription services, Microsoft could harm competition in the distribution of games via cloud game streaming services, therefore strengthening its position in the PC games market.
Microsoft must commit to new licensing practices
To remedy this, Microsoft has offered comprehensive licensing commitments over a 10-year duration that would require the company to license popular Activision Blizzard games automatically to competing cloud gaming services.
“Our decision represents an important step in this direction, by bringing Activision’s popular games to many more devices and consumers than before thanks to cloud game streaming,” said Margrethe Vestager, executive vice-president in charge of competition policy. “The commitments offered by Microsoft will enable for the first time the streaming of such games in any cloud game streaming services, enhancing competition and opportunities for growth.”
While not commenting on the ruling directly, in a statement providing by Microsoft, Brad Smith, vice chairman and president of Microsoft, said the new licensing conditions will empower millions of consumers worldwide to play these games on any device they choose.
Microsoft-Activision deal still faces regulatory hurdles
The EU Commission is the eighth regulatory body to have approved the acquisition, after Saudia Arabia, Brazil, Serbia, Chile, Japan, South Africa, and Ukraine. However, the CMA has blocked the deal over concerns the it could “alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”
In response to the Commission’s ruling, the CMA wrote on Twitter: “Microsoft’s proposals, accepted by the European Commission today, would allow Microsoft to set the terms and conditions for this market for the next 10 years… [replacing] a free, open and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale. This is one of the reasons the CMA’s independent panel group rejected Microsoft’s proposals and prevented this deal.
“While we recognise and respect that the European Commission is entitled to take a different view, the CMA stands by its decision,” the statement read.
While the EU’s ruling will be a boost for Microsoft, unless the company is able to successfully appeal the CMA’s ruling in the UK's Competition Appeal Tribunal, Microsoft will be faced with having to abandon the deal — which will leave it with a termination bill of up to $3 billion — or withdraw from the UK market.
“Ultimately I'm not surprised [the EU] approved [the deal],” said Forrester analyst Will McKeon-White, who noted that Microsoft's commitment to allow other gaming platforms to host its games was key. “Microsoft was quickly able prove that cloud gaming monopolisation is not their objective here,” he said.
Since CMAs objection was surrounding cloud gaming monopolisation, McKeon-White strongly anticipates the deal to go though, eventually. “There might be additional unexpected legal hurdles but Microsoft is committed to playing nice with the gaming ecosystem, and will continue to do so. This does unfortunately further power concentration in the market, but does not (yet) harm competition,” he said.