The European Commission opens in-depth investigation into the proposed acquisition of Activision Blizzard by Microsoft

In January, Microsoft announced that it will acquire Activision Blizzard, a leader in game development and interactive entertainment content publisher for about $69 billion. UK’s competition authority recently launched an in-depth investigation into this acquisition while Brazil’s authority approved the deal already.

Today, the European Commission announced that it has opened an in-depth investigation into the proposed acquisition of Activision Blizzard by Microsoft. EC is concerned that the proposed acquisition may reduce competition in the markets for the distribution of console and PC games.

The EC’s preliminary competition concerns are listed below:

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

The Commission will now start an in-depth investigation and it has 90 working days, until 23 March 2023, to take a decision. It is important to note that the opening of an in-depth inquiry does not prejudge the outcome of the investigation. During its recent earnings call, Activision Blizzard mentioned that it is confident that Microsoft’s acquisition will go through in 2023 as expected.