In what has been dubbed the ‘largest deal in tech history’, Microsoft has been granted the right to finalize its $75 billion acquisition of Activision Blizzard, the company behind the famous Call of Duty game series.
A significant triumph for Microsoft has been delivered by a Federal Judge who refused to block its impending acquisition of video game firm Activision Blizzard, worth $69 billion. Regulatory authorities around the world had attempted to scrap the transaction, arguing it would be detrimental to competition.
This landmark decision follows an attempt by the Federal Trade Commission (FTC) to block the merger over concerns of stifling competition and limiting consumer access to games.
A Pass – After A Block
Furthermore, it follows a block in the UK. Microsoft’s $68.7 billion acquisition of Activision Blizzard has been blocked by the UK’s Competition and Markets Authority (CMA). The CMA was concerned that the deal could reduce innovation and choice in the fast-growing cloud gaming market, as Microsoft might make Activision’s games exclusive to its own cloud gaming service.
Despite Microsoft’s attempts to alleviate these concerns by signing cloud gaming deals with Boosteroid, Ubitus, and Nvidia, the UK’s CMA found these deals limited in scope and insufficient to ensure open competition.
Approval – In Places
Regulators in several countries, including Saudi Arabia, Brazil, Chile, Serbia, Japan, and South Africa, have approved the deal. The European Union (EU) has approved Microsoft’s $69 billion acquisition of Activision Blizzard, the creator of popular video game titles such as Call of Duty and World of Warcraft.
The EU’s decision indeed comes after the UK’s Competition and Markets Authority (CMA) blocked the deal. The approval by the European Commission, the EU’s executive arm, revived Microsoft’s hopes for the acquisition.
The EU accepted Microsoft’s concessions regarding cloud gaming, which was a concern for both the EU and the CMA. The EU’s competition commissioner stated that the decision would expand the availability of Activision’s games through cloud game streaming and enhance competition.
It’s In the Details
The US Federal Trade Commission (FTC) seeked to block the acquisition. District Judge Jacqueline Scott Corley, however, dismissed the FTC’s claims in a ruling, stating, ‘the record evidence points to more consumer access to Call of Duty and other Activision content.’
Notably, Microsoft, the manufacturer of Xbox consoles, has pledged to ensure Call of Duty’s availability on PlayStation for the next ten years – a commitment that was instrumental in swaying the judge’s decision.
The FTC’s stance was part of a broader effort initiated by the Biden administration to obstruct large-scale mergers. Still, the court ruling affirmed that the deal could proceed as planned on July 18. In response to the announcement, Activision’s share price saw an immediate surge of 10%.
Uniting Microsoft and Activision
A successful merger will unite the forces of Microsoft and Activision Blizzard, which, apart from Call of Duty, is known for the successful game franchises Crash Bandicoot, World of Warcraft, and Candy Crush. Activision’s CEO, Bobby Kotick, said that the merger would ‘enable competition rather than allow entrenched market leaders to continue to dominate.’
The court proceedings witnessed testimony from prominent industry figures, including Microsoft’s CEO Satya Nadella. As part of his testimony, Nadella reassured the court of Microsoft’s intention to make Activision games available across different platforms.
Despite the positive ruling, Microsoft still has a challenge to overcome in the UK in particular, where the Competition and Markets Authority (CMA) has yet to approve the deal. Nevertheless, there are positive indications as the CMA has invited Microsoft to propose how it will address competition concerns.
Scale Matters – Hence the Roadblocks
Microsoft’s acquisition of Activision Blizzard is of unprecedented scale in the tech industry and thus garnered significant attention and scrutiny. However, the ultimate ruling favors the promise of enhancing consumer access and ensuring competition in the gaming industry, thereby marking a significant victory for Microsoft.
The decision is a setback for the FTC and its Chair Lina Khan, who has been an active advocate for breaking up large tech firms to avoid monopoly-like scenarios. However, the ruling also underscores the importance of substantiating the claims of potential harm arising from such mergers. As Microsoft prepares to conclude its acquisition, the tech industry will keenly watch the implications of this mega-deal.
It does come down to a matter of competition of course. While the deal could limit the availability of certain games to Xbox, mobile, or PC gamers, Spencer has assured that Activision Blizzard games will continue to be supported on a variety of platforms.
However, there are concerns that such acquisitions by large companies could stifle innovation in the industry by decreasing the number of independent titles and shifting focus to revenue-generating games or those that can maintain an active online community.
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