EU approves Microsoft’s Activision takeover in break with UK competition watchdog

The European Commission has cleared Microsoft’s $69bn takeover of Call of Duty publisher Activision Blizzard (Activision)
The European Commission has cleared Microsoft’s $69bn takeover of Call of Duty publisher Activision Blizzard (Activision)

The European Commission has cleared Microsoft’s $69bn takeover of Call of Duty publisher Activision Blizzard, a move that will likely put further pressure on the CMA’s decision to block the deal.

The UK’s competition watchdog blocked the deal last month, saying it would hamper competition in the emerging cloud gaming market. Both Microsoft and Activision slammed the decision, with the game publisher saying the decision was a “disservice to UK citizens, who face increasingly dire economic prospects”.

But today the European Commission found no such reasons to block the deal. It said that rather than harming consumers, the deal would “kickstart” the cloud gaming market, where games are streamed online from remote servers.

Alex Haffner, competition partner at London law firm Fladgate, highlighted how the deal leaves the CMA standing alone in its decision.

“The European Commission’s decision leaves clear blue water between it and the UK CMA in their assessment of whether competitive concerns as to the future of the cloud gaming market could properly be dealt with through (behavioural) commitments offered by the parties,” he said.

“Whereas the Commission felt these commitments, essentially a form of open licensing allowing gamers to stream Activision games on the platform/device of their choice  were ‘sufficiently comprehensive’, the CMA’s earlier decision described the same form of commitments as too static and unable to account for changes in the market over time.

“Critics of the CMA’s stance, of which there have been many, will inevitably seize on today’s decision as proving the point made that the UK’s regulatory regime is too rigid and stifles innovation. Microsoft and Activision’s lawyers will also use the decision to provide greater ballast to their appeal of the CMA’s decision which is in the works.

Haffner added that the US Federal Trade Commission’s decision on the mega-deal will be closely watched.

“What is now at stake, however, is not just any perceived differences in the UK and EU regulatory regimes, but more fundamentally whether the power wielded by big tech needs to be dealt with through structural rather than behavioural means,” he said. “It is worth remembering also that the US Federal Trade Commission has yet to reach its final decision in connection with the same merger and many have suggested they too are gunning for Big Tech.

“There is clearly still much to play for here.”

Activision Blizzard CEO Bobby Kotick said the company planned further expansion in Europe upon completion of the merger.

“The EC conducted an extremely thorough, deliberate process to gain a comprehensive understanding of gaming,” he said. “As a result, they approved our merger with Microsoft, although they required stringent remedies to ensure robust competition in our rapidly growing industry.

“We have deep roots in Europe. Our company was founded in France. Candy Crush — one of our most successful franchises — was created in Sweden. And the senior leadership of our company comes from across the EU, including Austria, Germany, and Sweden.

“We intend to meaningfully expand our investment and workforce throughout the EU, and we’re excited for the benefits our transaction brings to players in Europe and around the world.”