Microsoft's Acquisition of Activision Blizzard: The Path to Regulatory Approval

The proposed acquisition of Activision Blizzard by Microsoft, valued at $70 billion, has been under intense scrutiny by regulatory bodies worldwide. This complex process involves multiple entities from various countries, all of which must review the deal before it can proceed. Below, we provide a detailed breakdown of the regulatory hurdles faced by Microsoft and Activision Blizzard, initially published in the summer of 2022 and updated regularly as the situation evolved. On October 13, 2023, the UK's Competition and Markets Authority (CMA) approved the transaction, paving the way for Microsoft's acquisition of Activision Blizzard to move forward. Key questions surrounding the deal include its current status, the necessity of regulatory approval, the role of regulatory bodies, and the phases involved in the approval process. The UK's initial block of the deal does not necessarily signify its demise, as the EU's approval indicates that the acquisition can still proceed with certain conditions. The Federal Trade Commission's (FTC) legal complaint may pose a challenge, but regulators' primary concerns revolve around the potential for Microsoft to dominate the gaming industry, particularly in cloud gaming, and the implications of such dominance for consumers. Microsoft has addressed these concerns through various proposals, including the sale of cloud gaming rights for Activision Blizzard's titles to Ubisoft, a move designed to mitigate competition concerns. The acquisition's impact on the gaming landscape, including the potential for exclusivity of popular titles like Call of Duty, remains a critical point of discussion. As the process unfolds, regulatory bodies in the US, UK, and EU will continue to play pivotal roles in determining the outcome, with their decisions potentially affecting the global gaming industry. The deal's approval is contingent upon satisfying regulatory requirements in these key markets, with over 40 other countries having already given their approval. This acquisition is monumental, with the potential to transform not just Microsoft and Xbox but the entire gaming sector, impacting everyone from small developers to major industry players and, of course, consumers. Regulatory bodies aim to prevent antitrust issues, ensuring that no single company becomes overly dominant, thereby protecting competition and consumer interests. Microsoft must secure antitrust approval from major regulatory bodies, including the FTC in the US, the CMA in the UK, and the European Commission in the EU. Each of these bodies has the authority to block the deal, impose conditions, or approve it outright, with their decisions having global implications. The regulatory process typically involves two phases: an initial review followed by a more in-depth analysis if necessary. The FTC, CMA, and European Commission have each expressed concerns about the deal, citing potential harms to competition, particularly in the cloud gaming and multi-game subscription services markets. Microsoft has proposed remedies to address these concerns, including offering Call of Duty on PlayStation platforms for ten years and providing licenses for cloud streaming services. The European Commission approved the deal on May 15, 2023, after Microsoft offered concessions to alleviate concerns about competition in the cloud gaming space. The CMA, while initially blocking the deal, has since preliminarily approved a modified version of the acquisition, with Microsoft proposing to sell cloud gaming rights to Ubisoft. The FTC withdrew its administrative challenge after a court denied its request to block the deal, though it had previously expressed concerns about Microsoft's history of acquiring and using gaming content to suppress competition. As the acquisition moves forward, regulators will continue to scrutinize the deal, weighing the potential benefits against the risks to competition and consumer welfare. The outcome will have far-reaching implications for the gaming industry, influencing the competitive landscape and shaping the future of gaming consoles, subscription services, and cloud gaming.