Microsoft is getting ready to defend its Activision Blizzard acquisition to EU regulators

Microsoft is getting ready to defend its Activision Blizzard acquisition to EU regulators

Clock’s ticking on an EU antitrust decision.
Illustration: Dado Ruvic (Reuters)

Microsoft has a chance to argue its case to buy Activision in front of the European Union’s antitrust authorities.

The Redmond, Washington-based software giant will make a “last-ditch effort” to defend its bid at a closed hearing in Brussels tomorrow (Feb. 21), Reuters reported. The company will counter the statement of objections from the European Commission warning about the deal being anti-competitive.

Top executives from Microsoft, Activision Blizzard, and Sony, as well as representatives from Google, Nvidia, Electronic Arts and Valve, are expected to appear at the closed-door hearing, according to news service MLex.

Last year, Microsoft announced a $68.7 billion deal to buy the maker behind titles such as Call of Duty, World of Warcraft, Overwatch, and the mobile game Candy Crush, in a bid to better compete with large publishers like Tencent and Sony.

However, the deal attracted attention from antitrust authorities all over because it wasn’t simply a horizontal one, consolidating players in an industry. It was a vertical one, where Microsoft would get more control of the total supply of video games—games it could make exclusive to its Xbox console.

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While the US Federal Trade Commission has sued to block the takeover and the UK has expressed concern, EU regulators seem to have taken the lead in scrutinizing the deal.

Timeline of antitrust backlash for the Microsoft-Activision deal

Jan. 18, 2022: Microsoft announces plans to acquire Activision Blizzard

July 6, 2022: Britain’s Competition and Markets Authority (CMA) launches a probe

Aug. 3, 2022: Rival Sony pushes back on the potential deal, claiming that games like Call of Duty are “essential” and even influence people’s console-buying decisions.

Sep. 2, 2022: The Verge reports that Xbox chief Phil Spencer made a commitment to PlayStation boss Jim Ryan in a written letter that Call of Duty would stay on the PlayStation storefront for “several years” even if Microsoft’s acquisition of Activision Blizzard is approved.

Sept. 7, 2022: Playstation head honcho Jim Ryan calls “inadequate” Microsoft’s offer to keep Call of Duty on PlayStation for three years after the current agreement expires.

Nov. 28, 2022: Reuters reports that Microsoft will offer “concessions” to the European Commission, including a 10-year licensing deal with Sony.

Dec. 5, 2022: In an op-ed, Microsoft president Brad Smith confirms Microsoft offered Sony a 10-year contract to make Call of Duty games available on PlayStation at the same time as their release on Xbox if the Redmond company completes its proposed acquisition of Activision Blizzard, which Sony rejected.

Dec. 7, 2022: Microsoft makes a 10-year-deal with Nintendo to make Call of Duty available on the Kyoto-based company’s consoles, including Switch, and says its committed to make the first-person shooter video game franchise available to Valve Software’s online gaming platform Steam. But these partners are too small to convince regulators.

Dec. 8, 2022: The US Federal Trade Commission (FTC) announces it will sue to block Microsoft’s takeover of Activision. If approved, the deal would “enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business,” the FTC argues.

Dec. 20, 2022: A group of gamers sue Microsoft to block the deal, claiming it would equip Microsoft with “far-outsized market power” and “the ability to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition.”

Feb. 1, 2023: Microsoft receives a formal statement of objections from the European Commission

Feb. 8, 2023: In the UK, the CMA provisionally reports “competition concerns” about the merger. It suggests that, to win approval, Activision Blizzard would need to sell the Call of Duty part of its business first.

April 11, 2023: The EU Commission’s deadline to rule on whether to allow the deal with or without conditions, or to block it entirely.

June 2023: Date by which Microsoft hopes to seal the deal.

Quotable: What will happen after Microsoft’s European Commission hearing?

“A merger hearing is very similar to a trial, but it is not public. A decision is not announced immediately, but the case team working on this particular merger review may state its recommendation (such as whether the deal should be cleared unconditionally, with conditions, or not at all) […] Working out an agreement with the European Commission—one of the world’s most well-respected antitrust enforcers—could be an inflection point and lead to settlements in other jurisdictions.”Florian Muellerapp developer and intellectual property activist

Charted: Microsoft acquisitions that flew under the antitrust radar

There was a time Microsoft’s antitrust troubles were plentiful. But in recent years, the software giant’s focus on enterprise software has allowed it to largely go under the regulatory radar. None of its previous acquisition matched the scale of the Activision deal.

Why regulators care about Call of Dutyby the digits

425 million: Lifetime unit sales for the Call of Duty franchise

$30 billion: Call of Duty series’ lifetime revenue

125 million: Registered players for CoD: Warzone since its launch in March 2020

650 million: Downloads Call of Duty: Mobile has generated since its launch in 2019

3,000: People working on the Call of Duty franchise

3-5 years: How long each release takes to develop

Over $300 million: Budget for each release

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