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European Commission: Microsoft-Activision merger could reduce competition

The European Commission expresses its concerns that the Microsoft-Activision merger could significantly reduce competition across multiple gaming sectors.

European Commission: Microsoft-Activision merger could reduce competition
Published Nov 8, 2022 1:32 PM CST   |   Updated Fri, Dec 2 2022 11:31 PM CST
2 minutes & 33 seconds read time

The European Commission today announced that it would not outright approve the Microsoft-Activision merger, and the regulatory body has expressed its concerns about the merger.

European Commission: Microsoft-Activision merger could reduce competition 1

Microsoft's proposed $70 billion buyout of Activision-Blizzard is being closely scrutinized by worldwide regulators. The merger has entered in investigation phases across multiple regulators including the FTC in the United States, the CMA in the United Kingdom, and now the European Commission in Europe.

The European Commission is prepared to closely examine the deal, but preliminary findings suggest that the Microsoft-Activision merger could significantly reduce competition across multiple gaming segments including PC and console game distribution, multi-game subscription services, and the nascent cloud streaming market. The EU regulators make similar arguments as the CMA, who has been the most vocal regarding the merger.

The core of the EC's views are the incredible power of the Activision-Blizzard video games library, which includes 8 billion-dollar IPs, one of which, Call of Duty, has now made more than $31 billion in its lifetime. The EC argues that Microsoft could use this power as a kind of club that stifles competition and forecloses markets.

"The Commission's preliminary investigation shows that the transaction may significantly reduce competition on the markets for the distribution of console and PC video games, including multi-game subscription services and/or cloud game streaming services, and for PC operating systems.

"In particular, the Commission is concerned that, by acquiring Activision Blizzard, Microsoft may foreclose access to Activision Blizzard's console and PC video games, especially to high-profile and highly successful games (so-called 'AAA' games) such as 'Call of Duty'."

Microsoft's Phil Spencer has repeatedly said that Call of Duty would remain on PlayStation, and has been more confident and firm in his words:

"We're not taking Call of Duty from PlayStation. That's not our intent our intent is not to do that. As long as there's a PlayStation out there to ship to," Spencer had said last month.

The EC goes on:

The preliminary investigation suggests that Microsoft may have the ability, as well as a potential economic incentive, to engage in foreclosure strategies vis-a-vis Microsoft's rival distributors of console video games, such as preventing these companies from distributing Activision Blizzard's console video games on consoles or degrading the terms and conditions for their use of or access to these video games.

When it comes to multi-game subscription services and/or cloud game streaming services in particular, the Commission is concerned that, by acquiring Activision Blizzard, Microsoft may foreclose access, to the detriment of its rival distributors of console and PC video games that offer such services, to its own PC and console video games, which are key for the provision of the nascent services of multi-game subscription and cloud game streaming.

Such foreclosure strategies could reduce competition in the markets for the distribution of console and PC video games, leading to higher prices, lower quality and less innovation for console game distributors, which may in turn be passed on to consumers.

Finally, at this stage of the investigation, the Commission has concerns that the proposed acquisition may reduce competition on the market for PC operating systems. In particular, the Commission is concerned that Microsoft may reduce the ability of rival providers of PC operating systems to compete with Microsoft's operating system Windows, by combining Activision Blizzard's games and Microsoft's distribution of games via cloud game streaming to Windows. This would discourage users to buy non-Windows PCs.

The preliminary investigation suggests that Microsoft may have the ability, as well as a potential economic incentive, to engage in such conduct vis-a-vis rival providers of PC operating systems.

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NEWS SOURCE:ec.europa.eu

Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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