The biggest-ever deal in video gaming has also been one of the hardest to pull off. Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc. finally looks like it may happen, but only after a year and a half of jousting with global regulators concerned by the potential market power of the combined company. The fight isn’t quite over, with the US Federal Trade Commission likely to continue challenging the deal even after it has gone through.
1. Why did regulators oppose a Microsoft-Activision deal?
The FTC sued Microsoft in December 2022, alleging that the acquisition would choke competition in the online gaming market, which mints billions of dollars per year. The agency argued that combining the Xbox console maker with one of the world’s largest game makers could give it an unfair advantage over rivals. Activision’s titles include tile-matching game Candy Crush and the massively popular Call of Duty shooting game. In order to stave off antitrust scrutiny, Microsoft promised to keep Call of Duty on rival Sony Corp.’s PlayStation console. A federal judge later ruled that the deal can go ahead. The UK’s Competition and Markets Authority voiced concerns similar to those of the FTC before agreeing to support the deal with some concessions from the companies.
2. Could the FTC still block the deal?
The agency isn’t giving up. FTC Chair Lina Khan, who has emerged as the most aggressive US trustbuster in decades, vowed to appeal the federal judge’s decision. And the agency is pursuing a separate administrative challenge through its in-house judicial system. An FTC administrative judge can’t block a deal, but can rule that it’s anticompetitive, which sends the matter to the agency’s commissioners. The commissioners then have the power to unwind a deal, subject to a legal appeal by the parties involved. However, analysts say it’s unlikely the FTC will successfully unwind or change the deal after it’s been finalized. The companies say they are confident the takeover will eventually happen.
WATCH: The US Federal Trade Commission has paused its in-house trial against Microsoft Corp.’s acquisition of Activision Blizzard Inc. Sara Forden reports.
Source: Bloomberg
3. What happened with the UK antitrust case?
When the CMA vetoed the deal in April, it argued it could result in higher prices, less choice and less innovation for UK gamers. Microsoft appealed and, shortly after the US judge’s ruling, all parties agreed to delay the litigation. Then on July 14, Bloomberg News reported that Microsoft and Activision were considering giving up some control of their cloud-gaming business in the UK as a way to appease the regulators. Microsoft agreed to sell the cloud rights of current and future Activision games released over the next 15 years to another rival, Ubisoft Entertainment SA. That was enough for the CMA, which gave its formal approval to the deal on Oct. 13.
The Activision Blizzard Call of Duty website on a smartphone arranged in the Brooklyn borough of New York, US, on Monday, May 16, 2023. Microsoft Corp.’s $69 billion takeover of Activision Blizzard Inc. won European Union approval, putting the bloc at odds with its UK and US counterparts.
Photographer: Gabby Jones/Bloomberg
4. What other risks remain?
The restructured deal may provoke further scrutiny from European Union regulators, who earlier approved the deal. A questionnaire circulated to market competitors after Microsoft’s proposal to the UK regulator sought to determine whether the revised deal could pose any immediate concerns for the European market. The EU is now weighing whether Microsoft needs to refile the acquisition to its merger enforcers. The bloc wants to know if the new arrangement with Ubisoft means the acquisition constitutes a new transaction, and whether the remedies originally agreed between the European Commission and Microsoft — a 10-year deal for cloud gaming rivals to access Activision titles — are still sufficient to deal with the EU’s competition concerns.
5. Why does Microsoft want to buy Activision?
The deal would provide a big boost to Microsoft’s mobile games business, solidifying its status as the third-biggest player in the gaming world. It would bring in thousands of game developers with experience working on hit titles, along with the games they produced, driving more players to Xbox and cementing the loyalty of existing customers. The acquisition would also help Microsoft get a leg up in the nascent cloud streaming business.
The Reference Shelf
- Bloomberg Opinion columnist Chris Hughes weighs prospects for the revised deal proposal.
- How Microsoft outmaneuvered regulators to shift the deal’s fortunes.
- The FTC’s running archive of actions in the case.
- A 2021 story on Lina Khan’s plans for the FTC.
--With assistance from Leah Nylen, Cecilia D’Anastasio and Samuel Stolton.
To contact the reporters on this story:
Emily Birnbaum in Washington at ebirnbaum3@bloomberg.net;
Malathi Nayak in San Francisco at mnayak21@bloomberg.net
To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net
Thomas Pfeiffer, Jeremy Hodges
© 2023 Bloomberg L.P. All rights reserved. Used with permission.
