On Tuesday, the European Commission (EC), Europe’s antitrust watchdog, opened an extensive investigation into the proposed $68.7 billion acquisition of Activision Blizzard by Microsoft under EU merger rules. The press release explained the EC’s concerns that the proposed consolidation may reduce competition in the markets for the distribution of console and personal computer-based (PC) video games and for PC operating systems.
The proposed acquisition was announced in January and is the largest takeover since Microsoft’s purchase of LinkedIn in 2016 for $26.2 billion. The companies are both developers and publishers of games for PCs, game consoles, and mobile devices as well as distributors of games for PCs. Microsoft also distributes games and makes the Xbox gaming console, in addition to the PC operating system Windows and the cloud computing service Azure.
When disclosed, the companies said the combination of Activision’s popular game franchises, including Warcraft, Diablo, Overwatch, Call of Duty and Candy Crush, and Microsoft’s technology and distribution would ensure the latter’s continued success in the gaming industry.
The EC lists several competition-related concerns with the proposed deal, including that which companies tout as beneficial. “[B]y acquiring Activision Blizzard, Microsoft may foreclose access to Activision Blizzard’s console and PC video games, especially to high-profile and highly successful games (so-called ‘AAA’ games) such as ‘Call of Duty,’” the EC said.
The oversight body also cited the potential for Microsoft to prevent rival distributors from selling Activision’s console games or “degrading” the terms and conditions for their use or access. The EC has the same concern for multi-game subscription services and/or cloud game streaming services, the press release said.
Such “foreclosure strategies” could lessen competition and innovation while driving up prices, the brunt of which consumers may ultimately bear, the news release explained. It also noted the potential for the deal to reduce competition in the market for PC operating systems. By combining Activision’s games and Microsoft’s distribution thereof via cloud game streaming to Windows, users might be discouraged from buying non-Windows PCs.
For its part, the Federal Trade Commission has also eyed the deal with skepticism. According to a Washington Post article by Shannon Liao written two weeks ago, it is unclear when the FTC will issue a decision on the merger and whether it will come with caveats.