Microsoft-Activision Buyout Approved By European Commission

The European Commission has approved Microsoft’s acquisition of Activision Blizzard, commenting that Microsoft’s commitment to keep Activision games on rival platforms helped regulators reach a decision.

According to the EU, Microsoft “would have no incentive to refuse to distribute Activision’s games to Sony,” and even if it did decide to make those games exclusive to its platforms, doing so “would not significantly harm competition in the consoles market.”

“Even without being able to offer this specific game, Sony could leverage its size, extensive games catalog, and market position to fend off any attempt to weaken its competitive position,” the EU said in a press statement. The EU’s approval includes a requirement for Microsoft to automatically license Activision Blizzard games to competing cloud gaming services globally, giving consumers more choice on which platform they want to play these games on.

The EU did note that it originally had concerns about Microsoft’s dominance in the cloud gaming space, and that cloud gaming services could potentially hurt competition around the distribution of PC and console games if the acquisition goes through, but Microsoft did offer several remedies when this was first brought up.

To address those concerns, Microsoft offered a free license to consumers in the European Economic Area to allow them to stream, via any cloud game streaming services of their choice, all current and future Activision Blizzard PC and console games for which they have a license. Microsoft also offered a free license to cloud game streaming service providers for EEA-based gamers wanting to stream any Activision Blizzard’s PC and console games. This commitment will have a 10-year duration. The EU says that these commitments have fully addressed its concerns.

Reacting to the EU decision, Activision CEO Bobby Kotick says that the approved merger “required stringent remedies to ensure robust competition in our rapidly growing industry,” which Activision Blizzard and Microsoft will comply with. “The majority of the world’s gamers play on mobile phones. Europe has played a pivotal role in the development of gaming, especially mobile gaming, and we expect European game developers will continue to drive growth and innovation,” Kotick said in a press statement.

The EU joins Brazil, Chile, Saudi Arabia, South Africa, Serbia, and Japan in countries and regions that have approved the deal, but the deal was blocked in the UK over concerns about cloud gaming.

While the EU remains convinced, the UK’s Competition and Markets Authority believes that the acquisition could see “reduced innovation” for years to come in that market and has placed further restrictions on Microsoft and Activision Blizzard. The CMA has also responded to the EU’s approval, and claims that Microsoft will be able to “set the terms and conditions” for the market for the next decade.

“The UK, US, and European competition authorities are unanimous that this merger would harm competition in cloud gaming,” the CMA tweeted. “The CMA concluded that cloud gaming needs to continue as a free, competitive market to drive innovation and choice in this rapidly evolving sector.”

“Microsoft’s proposals, accepted by the European Commission today, would allow Microsoft to set the terms and conditions for this market for the next 10 years. They would replace a free, open, and competitive market with one subject to ongoing regulation of the games Microsoft sells, the platforms to which it sells them, and the conditions of sale. This is one of the reasons the CMA’s independent panel group rejected Microsoft’s proposals and prevented this deal. While we recognize and respect that the European Commission is entitled to take a different view, the CMA stands by its decision.”

Microsoft plans to appeal the process that led to the result and is lawyering up with some heavyweight legal power, and the UK government has also unveiled what it calls “smarter regulation” to foster a more competitive environment with less red tape, which could potentially help Microsoft. Microsoft president Brad Smith has blasted the CMA’s decision, calling it the “darkest day” for Microsoft and its plans.

Closer to home, the US Federal Trade Commission issued a legal complaint in an effort to block the deal, which will be explored by the government watchdog in an evidentiary hearing in August. With the CMA issue still ongoing, you can read up on what’s next for Microsoft and Activision Blizzard as the saga continues.