European Commission clears acquisition of Activision Blizzard by Microsoft

May 16, 2023

The European Commission has approved, under the EU Merger Regulation, Microsoft’s proposed acquisition of Activision Blizzard. The approval is conditional on Microsoft complying fully with certain commitments. The Commission says that those commitments fully address the competition concerns that it has identified and represent a significant improvement for cloud gaming compared with the current situation.

The Commission’s decision follows its investigation of the proposed acquisition. Both companies develop and publish games for PCs, consoles, and mobile devices and distribute games for PCs. Microsoft also distributes games for consoles and offers the Xbox console along with a wide range of products and services, including the PC operating system Windows. Activision’s games portfolio includes famous franchises such as Call of Duty, World of Warcraft, Overwatch and Diablo.

The Commission’s preliminary investigation found that Microsoft could harm competition:

  • in the distribution of console and PC video games, including multi-game subscription services and cloud game streaming services; and
  • in the supply of PC operating systems.

However, its in-depth market investigation indicated that Microsoft would not be able to harm rival consoles and rival multi-game subscription services.

The Commission does believe that the acquisition would harm competition in the distribution of PC and console games via cloud game streaming services. If Microsoft made Activision’s games exclusive to its own cloud game streaming service, Microsoft could also strengthen the position of Windows in the market for PC operating systems. This could happen if Microsoft hinders or degrades the streaming of Activision’s games on PCs using operating systems other than Windows.

To address the competition concerns identified by the Commission in the market for the distribution of PC and console games via cloud game streaming services, Microsoft offered the following commitments over the next ten years:

  • A free license to consumers in the EEA that would allow them to stream, via any cloud game streaming services of their choice, all current and future Activision Blizzard PC and console games for which they have a license.
  • A corresponding free license to cloud game streaming service providers to allow EEA-based gamers to stream any Activision Blizzard’s PC and console games.

Currently, Activision Blizzard neither licenses its games to cloud game streaming services, nor streams the games itself. The Commission says that the licences will ensure that gamers who have purchased one or more Activision games on a PC or console store, or who have subscribed to a multi-game subscription service that includes Activision games, have the right to stream those games with any cloud game streaming service of their choice and play them on any device using any operating system. The remedies also aim to ensure that Activision’s games available for streaming will have the same quality and
content as games available for traditional download.

The Commission concluded that the proposed acquisition, as modified by the commitments, would no longer raise competition concerns and would ultimately unlock significant benefits for competition and consumers. The Commission’s decision is conditional upon full compliance with the commitments. Under supervision of the Commission, an independent body will oversee monitoring their implementation.

The CMA has responded, saying that it disagrees with the Commission’s decision. It will be of interest to see how the US FTC reacts.