Microsoft Wins EU approval for the $69 billion Activision Acquisition Despite the UK Veto
Updated: Jun 5
Microsoft gains EU antitrust approval for the Activision takeover, as UK opposition sparks discussions among Chinese and South Korean regulators.
Microsoft Corp (MSFT.O) has secured EU antitrust clearance for its $69 billion acquisition of Activision (ATVI.O), a pivotal development that may influence Chinese and South Korean regulators despite British opposition to the deal.
However, the U.S. software giant still faces challenges in finalizing the largest takeover in the gaming industry. The company has until May 24 to appeal the decision by Britain's Competition & Markets Authority (CMA), with a final resolution expected to take several months. The U.S. Federal Trade Commission's decision on the matter is also pending, while Japan approved the acquisition in March.
The European Commission has deemed the transaction pro-competitive, citing Microsoft's commitment to licensing popular Activision games, such as "Call of Duty," to rival game streaming platforms. This move corroborates an earlier Reuters report from March. Margrethe Vestager, the European Union antitrust chief, described these licensing agreements as "practical and effective," noting that they improve the landscape for cloud game streaming compared to the current scenario. In contrast, the UK's stance suggests concerns about potential competition implications in this particular market segment.
The UK watchdog's decision to reject the deal was perceived as a demonstration of its regulatory influence post-Brexit. Meanwhile, Microsoft has been actively entering licensing agreements with other industry players, including Nvidia (NVDA.O), Nintendo (7974.T), Ukraine's Boosteroid and Japan's Ubitus are preparing for the integration of Activision games into their platforms should the acquisition proceed.
Microsoft President Brad Smith expressed that the European Commission's requirement for Microsoft to automatically license popular Activision Blizzard games to competing cloud gaming services will enable millions of consumers worldwide to enjoy these games on their preferred devices. Following the news, Activision's shares rose by 1.3% at 1650 GMT, while Microsoft's shares remained relatively stable.
Cloud gaming market growth emerged as a point of contention between the European Commission and UK regulators. Vestager highlighted the Commission's optimistic outlook on the development of the game streaming market, which accounted for only 1% of the total market in the previous year. The Commission believes that the remedies implemented, including widespread licensing, will facilitate expanded access to the cloud gaming market.
In contrast, the CMA emphasized the rapid growth of the streaming sector within gaming, contrasting it with the mature console market. The CMA noted that Microsoft already dominates 60-70% of global cloud gaming services and possesses other influential assets, such as Xbox, the leading PC operating system Windows and the cloud provider Azure. The CMA reaffirmed its veto decision, and Microsoft plans to appeal to the Competition Appeal Tribunal, with a final ruling expected in the coming months.
Alex Haffner, a partner at London law firm Fladgate, highlighted that the EU's decision will provide ammunition to critics of the CMA, suggesting that the UK's regulatory regime stifles innovation due to its rigid approach. Microsoft and Activision's legal teams are also expected to leverage this decision to strengthen their appeal against the CMA's ruling.
Microsoft gains EU antitrust approval for the $69 billion acquisition of Activision.
UK opposition prompts discussions among Chinese and South Korean regulators.
Final decision by the UK's Competition & Markets Authority (CMA) pending appeal by Microsoft.
US Federal Trade Commission's decision also pending, while Japan approved the acquisition.
European Commission deems the transaction pro-competitive due to licensing agreements.
UK watchdog's rejection seen as a display of regulatory influence post-Brexit.