european commission clears path for microsoft-activision merger

The European Commission has cleared Microsoft’s acquisition of Activision-Blizzard after the Redmond-based tech firm offered major concessions to address the competition concerns raised by the deal. The remedies are aimed at transforming the cloud gaming market by making Activision’s popular titles available across all cloud game streaming platforms for the first time.

The Commission’s investigation found that Microsoft could have harmed its rival cloud gaming services by withholding Activision’s games by reducing competition in this emerging market. However, Microsoft has offered far-reaching commitments to remedy these concerns.

Moving forward, Microsoft (MSFT) will provide free licenses for Activision’s games to all cloud gaming services and consumers in the European Economic Area for 10 years. The licenses will allow cloud platforms and EEA gamers to stream any current or future Activision/Blizzard PC or console games that they own, regardless of where they purchased the titles.

Margrethe Vestager, Executive Vice-President in charge of competition policy for the European Commission, commented: “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”.

She added: “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”.

Sony’s Dominant Position in the Console Market Will Not Be Threatened

The Commission concluded that the remedies “will unlock significant benefits for competition and consumers, by bringing Activision’s games to new platforms, including smaller EU players, and to more devices than before.”

An independent trustee will monitor Microsoft’s compliance with the commitments. These include ensuring Activision’s games available for streaming will have the same quality and content as titles distributed through traditional means.

Without the concessions, the Commission’s investigation found Microsoft had incentives to withhold Activision’s games from rivals to favor its own cloud gaming service, Game Pass Ultimate.

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Meanwhile, according to the press release, the Commission found that Microsoft would not actually have incentives to refuse to distribute Activision’s games to Sony, the leading console distributor.

The announcement states that there are four Sony Playstation consoles for every Microsoft Xbox console within the European Economic Area (EEA), as a result it does not make financial sense to Microsoft to stop distributing the most popular games developed by Activision-Blizzard to the dominant player in this market.

The Commission also believes that even if Microsoft did decide to withdraw Activision’s games from the PlayStation, this would not significantly harm Sony’s competitive position in the console market.

The Commission’s Views Part Ways with That of Other Major Antitrust Watchdogs

The European Commission’s approval of the Microsoft-Activision deal contrasts sharply with the decisions made by antitrust regulators in the UK and US to block the merger. The United Kingdom’s Competition and Markets Authority (CMA) surprised both companies in April by effectively banning the $69 billion acquisition, arguing that it would harm competition in cloud gaming services in the UK.

The interim order issued this month goes further by barring Microsoft from increasing its stake in Activision without permission.

The CMA deemed Microsoft’s proposed remedies, including making Activision games available on rival platforms for 10 years, insufficient. The regulator argued that accepting the remedies “would inevitably require some degree of regulatory oversight by the CMA” while blocking the merger “would effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention.”

The CMA concluded that the harms brought forth by the merger outweighed the benefits of making Activision’s games available to the Microsoft’s GamePass subscription.

Activision expressed disappointment with the CMA’s “irrational” and “disproportionate” decision, saying the deal is pro-competitive. However, regulators in the European Union reached a different conclusion after Microsoft offered commitments to license Activision’s games to all cloud gaming services for 10 years. The Federal Trade Commission in the United States also opposed the merger from the outset.

Activision CEO Bobby Kotick was reportedly “surprised” by the CMA’s decision and suggested the US FTC had influenced the UK regulator. The FTC denies conspiring with the CMA, noting that “independent antitrust regulators can simply make their own judgments” about anticompetitive deals.

The European Commission’s approval of the Microsoft-Activision deal this month signals diverging views among global regulators, with the EU convinced the concessions will promote competition in cloud gaming while agencies in the UK and US believe the merger itself poses too great a risk. The differing decisions highlight the complicated realities of regulating large tech mergers in an increasingly connected global market.

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