Video games: the European Union approves the Microsoft-Activision merger, threatened by a British veto

The European Commission approved, Monday, May 15, the acquisition of the American video game publisher Activision Blizzard by Microsoft for 69 billion dollars (63.5 million euros), three weeks after a British veto which jeopardized the operation.

The future of this giant merger remains totally uncertain. Not only does the positive opinion from Brussels contradict the rejection pronounced at the end of April by the British competition authority, the CMA, but also the American authority, the FTC, launched legal proceedings in December to block this takeover. .

This agreement is conditional on Microsoft’s compliance with measures proposed to guarantee competition in the market for dematerialized games accessible by streaming. These commitments “fully address the competition concerns raised by the Commission”the EU executive said in a statement.

In a video game sector in full consolidation, Microsoft, which markets the Xbox console, announced in January 2022 the acquisition of Activision Blizzard, publisher of successes such as call of duty, World of Warcraft And candy Crush, for 69 billion dollars, a record amount in this sector. The merger, if completed, would create the industry’s third-largest player in terms of revenue, behind China’s Tencent and Japan’s PlayStation maker Sony.

Divergent positions

The European Commission, guardian of competition in the Union, opened an in-depth investigation into this operation in November. The procedure will have made it possible to allay his fears. But, for the first time since Brexit in an issue of such magnitude, Brussels and London have adopted divergent positions. The CMA announced on April 26 its decision to block the mega-merger, deeming the risks too high for competition.

Microsoft had immediately announced that it would appeal. “This decision appears to reflect a misunderstanding of this market and how cloud technology actually works”, had estimated the group. Brussels’ clearance should provide him with strong arguments to challenge the CMA’s decision before the UK’s Competition Appeal Tribunal (CAT). “If Microsoft does not win the CAT appeal, it will not be able to proceed with the acquisition even if the European Commission approves itsays Anne Witt, specialist in competition law at Edhec. Unless, of course, Microsoft decides to exit the UK market, but that seems unlikely. »

Like its counterpart in the United Kingdom, the European regulator rules out any risk for competition in the game console market, while Sony was worried about being denied access to Activision Blizzard’s great successes.

“Microsoft would have no interest in refusing to distribute Activision games to Sony, which is the world’s leading distributor of console games”judged the European Commission, noting that PlayStation, a Sony product, sells four times more than Xbox, a Microsoft product.

“Sony could leverage its size, extensive games catalog and market position to counter any attempt to weaken its competitive position”explains the European executive.

Free licenses

The Commission had concerns, like the CMA, about the booming market for dematerialized games accessible by streaming which allow games to be played indiscriminately on tablet, smartphone or computer… However, unlike the British authority, it accepted the solutions proposed by Microsoft.

“For a period of ten years”the American giant will grant European consumers free licenses “for all current and future Activision Blizzard games” legally acquired, allowing them to play on any device, regardless of operating system. A corresponding free license will also be granted to competing streaming game services.

“This measure will apply globally and allow millions of consumers around the world to play these games on the device of their choice”welcomed Brad Smith, president of Microsoft, quoted in a press release.

“We intend to significantly increase our investments and our teams in the EU, and we look forward to seeing the benefits this transaction will bring to players in Europe and around the world”said Activision Blizzard boss Bobby Kotick.

The British competition authority, however, reiterated its veto on Monday evening. “Microsoft’s proposals, accepted today by the European Commission, would allow Microsoft to set the terms of this contract for the next ten years”said Sarah Cardell, Executive Director of the CMA.

The measures proposed by Microsoft “replace a free, open and competitive market with a market subject to permanent regulation of the games sold by Microsoft, the platforms on which it sells them and the conditions of sale”she explained.