The European Commission (EC) approved Microsoft’s $68.7 billion deal for Activision. The revelation comes a few weeks after the U.K. was the first to block the megabucks agreement, while the FTC in the U.S. is also seeking to stop it.
Europe had considered an in-depth investigation since November, when it expressed worry that Microsoft and Activision’s merger could decrease competition in the console and PC video game markets. However, the EC postponed its ruling after receiving additional remedies and undertakings from Microsoft. The EC’s final report states that approval is “conditional on full compliance with the commitments offered by Microsoft,” confirming that the merger will be approved today.
Microsoft’s bid for Activision, which publishes mega-franchises like Call of Duty, Candy Crush, and World of Warcraft, was first made in January last year. Microsoft would become the third-largest gaming firm by revenue after Tencent and Sony with Activision.
Microsoft would have too much power and control over game distribution, giving it the incentive to withhold popular titles from rival gaming platforms or otherwise degrade the playing experience on alternatives to encourage people to switch to its ecosystem, which includes Xbox and Windows.
The Competition and Markets Authority (CMA) focused on cloud gaming solely, while the U.K. had already examined the deal’s effects on console gaming. While Microsoft could withdraw titles from PlayStation, Sony’s console had enough market share to make it a profitable and desirable route for Microsoft to continue supporting Activision games. However, Windows’ “significant cloud infrastructure” could offer Microsoft an unfair advantage in cloud gaming.
Microsoft has pledged to keep Activision games on Sony, Nintendo, and Nvidia for ten years. The CMA stated that Microsoft’s proposals couldn’t replace “competitive dynamism” and were too dependent on Microsoft and regulatory control.
After the U.K.’s blockade, Activision said its growth plans for the U.K. would be “reassessed” because it was “closed for business.”
Europe has held huge tech corporations accountable for anti-competitive behavior but has never opposed tech mergers and acquisitions outside of the telecoms industry. Today’s findings match prior ones.
Like the U.K., the EC was more concerned with cloud-based game streaming services than console gaming. If Microsoft made Activision games exclusive to Game Pass Ultimate, it could reduce competition in a nascent market. On the other hand, limiting its streaming service could also boost its PC market share.
Microsoft received approval after promising to allow all European Economic Area (EEA) consumers to stream all current and future Activision games via any cloud-based streaming service for ten years.
The EC’s approval comes two months after Japan’s, but Europe has promised to monitor Microsoft’s influence on rival gaming businesses in the future. In addition, an “independent trustee” will oversee Microsoft’s compliance.
Activision CEO Bobby Kotick praised the European Commission for its “extremely thorough” procedure, despite the EU and U.K. conclusions. He added that Activision would invest more in the EU because of its “firm but pragmatic approach to gaming,” he added.
“We have deep roots in Europe—our company was founded in France,” Kotick told TechCrunch. Candy Crush—one of our most successful franchises—was launched in Sweden. Our top leadership includes Austria, Germany, and Sweden. We want to grow our investment and employees throughout the EU dramatically, and we’re excited about the benefits our transaction delivers to European and global players.”
The U.K.’s anti-competition body, the CMA, tweeted shortly after the EC announced that it would stand by its decision and that the EC had allowed Microsoft to dominate the cloud gaming market for the next decade.
“The U.K., U.S., and European competition authorities are unanimous that this merger would harm cloud gaming,” the CMA tweeted. “The CMA concluded that cloud gaming must remain a free, competitive market to drive innovation and choice in this rapidly evolving sector. Today, the European Commission approved Microsoft’s 10-year market rules. They would regulate Microsoft’s games, platforms, and sales terms, replacing a free, open, and competitive market. The CMA’s independent panel rejected Microsoft’s plans and banned this merger because of this.
After European regulators leave, Microsoft and Activision will focus on appealing the U.K.’s judgment.
