- Microsoft’s $68.7 billion acquisition of gaming firm Activision Blizzard will draw regulatory scrutiny.
- If games such as “Call of Duty” become exclusive to Microsoft, that will concern regulators.
- A probe is a “no brainer”, according to one EU competition expert.
Antitrust regulators at the European Commission are likely to dig their heels in on Microsoft’s record-breaking $68.7 billion acquisition of video-game publisher Activision Blizzard, announced Wednesday, according to competition experts.
Andrea Collart, a specialist in EU competition at Avisa Partners who spent six years in the European Commission’s Directorate-General for Competition, told Insider a probe was a “no brainer.”
The commission has to date fined Google and other major tech firms billions of dollars for competition breaches.
The deal will, according to the announcement, make Microsoft third-biggest in gaming by total revenue, behind Sony and Tencent. That position could work in its favor.
Microsoft has been smart to secure a huge deal in an industry where it’s not seen as the dominant player, reducing antitrust risk, Collart said.
But the nearly $70 billion price tag may still raise eyebrows. Sony’s market value plummeted by $20 billion yesterday after the news of the deal broke.
Activision Blizzard owns some of gaming’s most popular franchises, including “Call of Duty”, “World of Warcraft”, and “Candy Crush.” Its latest earnings report recorded 390 million monthly active users for the third quarter 2021.
With Microsoft not expecting to finalize the deal until 2023, the firm may have given itself leeway to resolve any regulatory hiccups from the EU. “I think they planned it in a way that they have time to resolve potential problems,” Collart said.
How much attention the EU pays to Microsoft may come down to how much it vertically integrates Activision Blizzard into its existing console, mobile, PC, and cloud ecosystems.
If “Call of Duty” and others are restricted to Microsoft’s platforms, that potentially constrains consumer choice. It also creates a strategic advantage for Game Pass, Microsoft’s
service that gamers can subscribe to for exclusive gaming content compatible with the Xbox, Matt Stoller of the American Economic Liberties Project wrote in a post published Wednesday.
If Microsoft keeps Activision Blizzard’s most important games open access, that’s a “behavioral remedy” that could ward off regulators, said Collart. Sony said Thursday it expects Microsoft to honor its contracts with Activision and ensure titles remain multiplatform, the Wall Street Journal reported.
The UK Competition and Markets Authority is investigating whether Google and Apple’s control over operating systems, app stores, and web browsers effectively constitutes a ‘duopoly’. If Microsoft integrated games exclusively into its own system, that could bring up similar concerns.
Perhaps tellingly, US FTC Chair Lina Khan on Wednesday compared the recent merger frenzy in big tech to United States v. Microsoft Corp., the 2001 landmark antitrust case where the government accused Microsoft of exerting control over PC makers by bundling Internet Explorer with Windows.
“Whenever you see potential moments of transition, that’s when enforcers need to be especially vigilant because that’s when incumbents often panic and realize that to stay relevant, to stay dominant, they may have to engage in tactics that ultimately end up being illegal,” Khan remarked.
Microsoft has managed to avoid the regulatory microscope recently, unlike Facebook and Google, but Activision is its biggest purchase to date and the most expensive ever acquisition in the video-game industry.
And regulators both in Europe and the US have been paying closer attention to tech giants sweeping smaller companies under their umbrella.
Microsoft has yet to formally notify the European Commission of the deal. The UK’s competition watchdog declined to comment on Wednesday.
“Can Microsoft maintain its position of largely flying under regulators’ radar after an acquisition this major? Well, possibly with this one still, maybe, yes,” Collart said, adding: “The next one would be more problematic for sure.”