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EU Antitrust Chief: Microsoft's Activision Blizzard Deal Has 'Significant Procompetitive Effects'

EU Antitrust Chief: Microsoft's Activision Blizzard Deal Has 'Significant Procompetitive Effects' - News

by William D'Angelo , posted on 25 May 2023 / 10,583 Views

European Union antitrust chief Margrethe Vestager in a speech today discussed the reasons as to why the European Commission approved Microsoft's Activision Blizzard acquisition.

The European Commission performed a "thorough investigation" into the merger as it looked at the potential impacts on gamers today, as well as in the future. This includes gamers on PC, console, and mobile devices.

"Occasionally, we reach decisions that are not aligned with every other jurisdiction," said Vestager. "So I'd like to take a few moments to set out why we believe the Microsoft/Activision merger - with appropriate remedies - is not only compatible with the Single Market, but in fact represents a positive development.

"No one doubts that this was a landmark transaction in the gaming industry. Gaming is a dynamic market that impacts millions of consumers in Europe. So the deal deserved a thorough investigation. We looked at impacts on gamers today and in the future - whether they play on PC, console, or on their phones. We focused on the development of cloud streaming, which will play an increasing role in how consumers access games."

EU Antitrust Chief: Microsoft's Activision Blizzard Deal Has 'Significant Procompetitive Effects'

The European Commission did drop its concerns over the video game console market as Sony sells four times as many PlayStation's and Microsoft sells Xbox's in the European Union. 

"An important finding was that the overall market share for Microsoft and Activision was generally low in Europe," said Vestager. "It's only when you look at specific segments like ‘shooter games' that you get to above 20%. And for consoles, Sony sells about 4 times more PlayStations than Microsoft sells Xboxs.

"With this context, we did not think the merger raised a vertical issue. I am told Call of Duty is a very popular shooter franchise. But we found that Microsoft would probably not shoot itself in the foot by stopping sales of Call of Duty games to the much larger PlayStation player base. Our colleagues at the CMA agreed with us and ultimately reached the same conclusion."

The European Commission did express concerns with the cloud gaming market and was worried Microsoft would make Activision games exclusive to Xbox Cloud Gaming. However, with Microsoft signing multiple 10-year deals with cloud streaming services, this was enough for the European Commission to approve the deal.

"Where we did have concerns was in cloud gaming - still a nascent market but one we expect to grow, because it offers many advantages for gamers," said Vestager. "For one, it enables gamers to untie games from specific devices - that means more accessibility and lower cost. So cloud gaming deserved an in-depth assessment. This was a common concern because, like us, the CMA focused on this market.

"We were worried that Microsoft would make Activision games exclusive to its own cloud gaming service. This would have restrained access to games and strengthened Window's position as an operating system.

"Where we diverged with the CMA was on remedies. We accepted a 10-year free license to consumers to allow them to stream all Activision games for which they have a license via any cloud service. And why did we do this instead of blocking the merger? Well, to us, this solution fully addressed our concerns. And on top of that, it had significant procompetitive effects.

"Consider the pre-merger situation, where Activision does not license its games to cloud services. So, in this case, the remedy opens the door for smaller cloud services in the EU to offer big games on their platforms, widening choice for gamers. The merits of this remedy was recognised across the spectrum - by developers, by cloud gaming providers, by distributors and of course also by consumer groups. And that is because it unlocked the potential of the cloud market."

EU Antitrust Chief: Microsoft's Activision Blizzard Deal Has 'Significant Procompetitive Effects'

Vestager added, "In other words, with our remedies Belgian gamers may soon be able to play Call of Duty with their Telenet internet connection throughout Belgium, and they could do so using a cloud gaming service that has not yet been launched.

"Again, let me emphasize that these types of remedies are the minority of our cases, by far. But when they work, why deprive ourselves of the option? This is what useful enforcement is all about. On the other hand, when they are too complex and difficult to monitor, we pass. Major transactions have been halted because of our rigorous approach to access remedies. Remember the NVidia/ARM merger, that was abandoned last year, or Illumina/Grail, that we blocked."

"In closing, I would like to say a few words about cooperation. Despite a divergent outcome, cooperation with other agencies around the globe on the Microsoft/Activision review was excellent. It involved not just the UK, but also Canada, the US, Australia and New Zealand."

Vestager concluded, "Our mission is to accompany that transition, one merger at a time. It is to find solutions that keep the game fair for all players, and working closely together with sister agencies as we do so. That is our Call of Duty."

Microsoft’s acquisition of Activision Blizzard has been approved in 37 countries representing over two billion people. This includes China, the European UnionUkraineSouth AfricaJapanChileBrazilSaudi Arabia, and Serbia

The two companies are facing an uphill battle as the UK regulator, Competition and Markets Authority (CMA), blocked the deal last month. Microsoft has filed its appeal to overturn the decision by the UK regulator. The case will be heard by the Competition Appeal Tribunal (CAT) in the UK, which is expected to take several months.

The deal is  also facing issues with the US Federal Trade Commission (FTC), who filed an antitrust lawsuit in December of last year

A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012 and taking over the hardware estimates in 2017. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel. You can contact the author on Twitter @TrunksWD.

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Libara (on 25 May 2023)

Just embarrassing the CMA even more.

  • +14
SecondWar Libara (on 26 May 2023)

I still don’t get these takes.
As the articles states, of the big three regulators its just the EC who have approved the deal, with the FTC an CMA both looking to block it.
So why when its the EC thats taken the divergent view is everyone focusing on how its the CMA who ‘must’ be wrong and why does everyone ignore the FTC’s position?

  • -6
Libara SecondWar (on 26 May 2023)

Anyone with half a brain can look at the arguments that the CMA used to justify their conclusion and see how wrong and devoid of facts they are. It's really that simple. The FTC just wants to block big tech regardless of what they try to do.

  • +10
Imaginedvl SecondWar (on 26 May 2023)

The FTC blocked it from the start without even looking at all the numbers or even talking to Microsoft (so they did not even have numbers). That's why everybody is ignoring them, in their case it is def. a political stand. Why would anyone pay attention to that.

  • +7
VAMatt Imaginedvl (on 26 May 2023)

The FTC is not attempting to block the deal. The FTC is playing politics, and possibly legitimately trying to get some legally binding concessions from Microsoft.

More likely though, it's just politics.

  • +5
Imaginedvl VAMatt (on 26 May 2023)

Right, Suing to block. Just typed too quickly to get to the point as it is not really relevant anyway ( the how) :)

What matter is the political aspect of it. Sending a message and wasting a lot of resources/time for political gain. Even if they know that they is no chance.

  • +3
VAMatt Imaginedvl (on 26 May 2023)

They are not suing to block the deal. It is literally not possible for the deal to be blocked via the suit that they have filed. They have intentionally avoided suing in federal court, because they know they don't have a case. They have filed suit in their own (sometimes called administrative) court, which does not have the legal ability to stop the deal from

A charitable interpretation of this is that they understand they don't have a solid case to block the deal, so they're just going to try to get some concessions from Microsoft. A less charitable, probably more realistic take on it, is that they are just playing political games.

  • +4
Imaginedvl VAMatt (on 26 May 2023)

The FTC is absolutely suing to ‘block’ yes… that’s exactly what they are doing. They cannot directly block it (unlike the CMA or EC) and this is why they are doing that (even if they know they won’t be able to).
I’m not sure why you are saying. otherwise…

You can talk about semantic if you want but that’s what the FTC is doing lol

  • -1
VAMatt Imaginedvl (on 26 May 2023)

No. You are simply not correct. They are suing to block the deal in a court that does not have the authority to stop the deal from closing.

  • +3
VAMatt Imaginedvl (on 26 May 2023)

Here is the relevant text:

Usually, it is easier to win a case to block a merger by going through an internal FTC judge as opposed to a US District Court. But an FTC judge cannot issue a preliminary injunction to stop a deal from closing.

  • +2
Imaginedvl VAMatt (on 26 May 2023)

No lol I’m done even trying. Microsoft knows that the FTC has a very weak case but the FTC intention is to block the deal lol it does not matter if they have a chance or not that the primary goal of their case…

Believe whatever you want at this point I’m not going to argue lol

  • -2
VAMatt Imaginedvl (on 26 May 2023)

It is impossible for them to block the deal. So I don't know what you're even talking about. The fact that they're suing to block the deal in a court that cannot block the deal means that the deal cannot be blocked, by any actions that they've taken so far, by the FTC.

They have an avenue in which they could actually attempt to block the deal. They've chosen not to do that. This shows you, plain as day, that they are not trying to block the deal. They literally are not trying to do it.

  • +3
VAMatt SecondWar (on 26 May 2023)

The FTC is not attempting to block the deal. The FTC has taken an action that they know has no possibility of stopping the deal from closing. They are trying to get Microsoft into legally binding concessions, exactly the same as the EC has done.

  • +2
Azzanation (on 25 May 2023)

The Director incharge of the CMA was an ex Sony/Google employee for their law firms. Ironically it was Sony and Google who pushed hard to block this deal.
Conflict of interests and corruption.

  • +11
Johnd Azzanation (on 26 May 2023)

Mike Ybarra was an xbox head and now runs Blizzard. Gave Microsoft the inside scoop when Sony were trying to buy them.
Hence Microsoft swooping in and buying for even more!

  • -9
Libara Johnd (on 26 May 2023)

Sony couldn't afford Blizzard.

  • +11
smroadkill15 Johnd (on 26 May 2023)

Wild take lol

  • +5
Imaginedvl Johnd (on 28 May 2023)

What? Sony could never afford them in the first place what are you blabbering about haha.
He is talking about facts here not speculations from people (whoever or whatever is your ‘source’) who are making up stuff out of their b..h.. :)

  • +2
Imaginedvl (on 25 May 2023)

Checks out :)

  • +3
enurtsol (6 days ago)

With the US FTC, it's been political from the start. Here's what was said by the antitrust expert who successfully litigated the monopoly case against Microsoft in the 1990s:

That the FTC head Lina Khan just wants to take antitrust cases to court, even with little evidence and a losing case, just to demonstrate to US Congress that the country needs new antitrust legislation

In other words, these cases are FTC political show for Congress:

"Antitrust expert who defeated Microsoft says FTC's Activision deal strategy is 'nutty' - FTC head Lina Khan is pursuing a stated strategy of bringing cases even with little evidence."

  • Lina Khan, head of the FTC, has publicly stated she wants the agency to bring cases forward even when the evidence isn't strong.

    Many are casting doubts that the FTC has the facts on its side to win one or both of these cases against these tech giants. Among the skeptics is Douglas Melamed, dubbed the Michael Jordan of antitrust law. Melamed is a former acting assistant attorney general in charge of the Antitrust Division at the Department of Justice. He was principal deputy assistant attorney general when the DOJ successfully sued Microsoft over antitrust violations in the 1990s.

    Melamed, who is now a professor at Stanford Law School, said FTC Chair Lina Khan is willing to lose cases to demonstrate to Congress that the country needs new antitrust legislation.

    “I think that’s kind of nutty,” Melamed said. “I think if you lose cases, the most likely inference Congress is going to draw is either you brought bad cases or you don’t know how to litigate them.”

    Melamed thinks Microsoft’s case might be an even tougher challenge for the FTC than the one with Meta and Within. He said based on the complaint, the agency seems to lack rigorous economic analysis to back up its claims against the tech giant.

    “In this case, the commission really doesn’t seem to care about economics at all. This seems to be built entirely on anecdote. And the storytelling about it – I think all good litigators tell a good story, but in antitrust, typically you back that up with some numbers and some rigorous economic analysis and there’s no indication of that in the complaint."

    Melamed is saying arguments vs Microsoft’s purchase of Activision are not backed up by economic analysis or numbers, and is anecdotal at best. It isn’t as clear a case as the one they pursued in the DOJ years ago about Microsoft locking other developers out of Windows.

  • 0
dane007 (on 25 May 2023)

Is Belgium internet that good for cloud gaming?

  • 0
AJNShelton dane007 (on 25 May 2023)

Surprisingly, yes, I tried xCloud there, works perfectly fine

  • 0
dane007 AJNShelton (on 25 May 2023)

No latency?

  • 0
AJNShelton dane007 (on 26 May 2023)

I am not skilled enough to notice small latency issues. I played Doom Eternal, Forza Horizon 4 and another game (don't recall), worked great

  • +1
Drakrami (on 27 May 2023)

Microsoft buying the top FPS franchise, WoW, Overwatch, Diablo is actually "pro competitive".

Not to mention they are already sitting on Halo, Gears, Forza, Fable, and recently bought ElderScrolls, Fallout and etc...

Thank about that for a minute. This lady is talking out of butt and probably accepting shady deals under the table.

  • -3
smroadkill15 Drakrami (on 27 May 2023)

There is no such thing as a monopoly of a genre lol. Making up criteria to prove some kind of monopoly is about as weak of an argument as anyone can have.

  • +2
tslog (on 25 May 2023)

CMA corruption growing more obvious every day.

Cost free licensing of Xbox & ABK games to other Cloud providers will help those small cloud companies grow & will be in “competition” with MS cloud, something the Corrupt CMA is lying about. CMA saying MS sets the cloud terms….what terms are they ? a FREE licence that will help them grow.
CMA corruption is so obvious it’s shocking.
Don’t forget that this CMA corruption will go unpunished & will be covered up as well by the British government, cause it’s too embarrassing to admit.

  • -4
SecondWar tslog (on 26 May 2023)

Again, just because you disagree with a decision doesn’t make it corrupt.
You keep basing your ‘conclusion’ on conjecture and circular logic.

  • +2
EpicRandy tslog (on 26 May 2023)

For me, the CMA simply overthought the cloud markets or (more likely) did the process having the pre-made concept the deal was anticompetitive so every finding that did not go with this vision did get overly scrutinized then discredited or downplayed even with dubious reasonings and every finding that did satisfy this pre-made bias got unchallenged.

You can see exactly that in the fact it took MS to point the CMA they did a very silly and basic math mistake regarding the console SLC they were trying to introduce.

However, there's no need for corruption to explain the situation, just a body that got drunk with their unaccountability and cater to their hardline appearance.

  • +4
LurkerJ (on 25 May 2023)

The EC is devoid of logic. Just like the CMA, they recognise the cloud market is going to be significant, and just the like the CMA, both asked for remedies. The EC goes ahead and accept remedies that will only a short specific period of time through which cloud gaming is barely to going to catch on, and when the tide will finally rise, MS will sink all ships but theirs because the remedies offered are not permanent.

In addition, someone is being willingly ignorant when they say "MS is probably not going to shoot themselves in the foot by withholding CoD", what planet do you live on? Big Tech, and MS in particular, are more than willing to dominate markets by eating up losses because they have always valued growth over profits. Just look at Amazon. Other companies have to actually try to make a profit or they will cease to exist.

I am fine with EC approving the merger, but this is just nonsense.

  • -7
Imaginedvl LurkerJ (on 25 May 2023)

I do not think they are ignorant... I believe they have probably more insight on what is going on with the numbers/market share than you :)

He specifically explained that COD is basically not as important as people are trying to put it in EU. And he is right, even if Microsoft "shot themselves" in the foot, the impact will be minimal and they do not care basically. And btw, Microsoft is going to do it; probably for next-gen, that's a given (or at least the exclusive content for Xbox will be present in the next-gen COD); as Sony did not want to sign the deal. And they probably know that too, but thinking that Microsoft would STOP selling COD on Play Station this generation is ludicrous, at best.

And both CMA/EU agreed on that. The only difference is that the CMA is saying that Microsoft WILL dictate the rules for the cloud market for the next 10 years. WHICH is non-sense because the remedies clearly prevent that and that's what people are calling out about the CMA (other than the non-sense stuff about being corrupt blah blah blah). Every cloud provider will be able to offer the WHOLE Xbox catalog for streaming. That's the opposite of controlling the market.

  • +15
EpicRandy LurkerJ (on 25 May 2023)

What the CMA and EU view as the cloud market differ from each other. The EU correctly identified the limits of the cloud markets while the CMA definition makes it overlap with other markets where they themselves found no SLC. It creates a paradox in which MS simply cannot propose remedies without them being actually made to cater to other markets.

In the CMA view an actor like Steam or Epic Store will suffer no SLC as a result of the transaction, but if they were to eventually propose a cloud streaming feature then they would be less competitive and be driven by MS on that front. Those concerns simply make no sense cause they cater to markets where Cloud is used as a distribution method and isn't the actual market like selling cloud service is.

Also, there are no entities that exist today that CMA remaining concerns protect, it is all about speculation of how the market could evolve without pinpointing how MS remedies would/could not apply.

More detail here :

  • +8
EpicRandy LurkerJ (on 25 May 2023)

Also, It's quite funny how you avoid mentioning that the remedies apply for 10 years and decide to instead describe it as "only a short specific period of time". 10 years is more than enough, even without considering that MS would basically be helping all actors for free within that time frame with the accepted remedy.

CMA asked many entities in what timeframe they see Cloud gaming becoming anything substantial and the vast majority said between 5-10 years.

And even if 10 years turns out not to be enough for this market to properly find its way, that would not mean regulators should have asked for more time, that would simply mean regulators wrongly assessed the market as warranting regulations as of today in the first place.

There's simply no way 10 years is not enough in all scenarios or that a regulator should go beyond this timeframe. 5 years is already huge and the CMA themselves already got rebuked by the CAT once for litigating beyond that scope.

  • +10
Azzanation LurkerJ (on 25 May 2023)

Why would MS cut Billions of pure profit by removing CoD? Billions not millions here. Its buisness suicide.

  • +8