Microsoft's successful acquisition of Activision Blizzard would create the world's third-largest game company by revenue, behind China's Tencent and Japan's Sony
Abstract: If Microsoft wants to realize its acquisition dream, the approval of regulators in the three major economies of the United States, the United Kingdom and the European Union is the most critical
Author: Wei Cheng
Microsoft wanted to buy a game company, but US and UK regulators disagreed, but the EU approved.
The process itself is quite dramatic, and if someone makes it into a "game", it will definitely sell.
Twists and turns
On May 15, 2023, the European Commission announced that it approved Microsoft's acquisition of Activision Blizzard, an American video game company.
But less than a month ago, Britain's antitrust regulator, the UK's Competition and Markets Authority (CMA), rejected Microsoft's same acquisition application.
Six months ago, the US antitrust regulator, the US Federal Trade Commission (FTC), also launched a lawsuit to try to block Microsoft's acquisition.
The EU's competition authority has long been considered harsher than the US and UK, but why has the situation reversed?
Let me start by describing the process of what has been called the largest acquisition in the history of technology companies.
Activision Blizzard is an American video game developer, publisher and distributor, which was renamed in 2008 by the merger of Vivendi Games by American video game publisher Activision Corporation, and is currently the largest game company in Europe and the United States in terms of revenue and market value, and its games include Call of Duty, Crash Wolf, Guitar Hero, Heroes of the Storm, Overwatch, Candy Legends, etc.
Call of Duty is a popular game from Activision Blizzard
On January 18, 2022, Microsoft announced the acquisition of Activision Blizzard for $95 per share with a total value of approximately $68.7 billion in cash. In April of the same year, Activision Blizzard's shareholders agreed to the acquisition proposal.
The deal is said to be the largest in Microsoft's history and the biggest acquisition in the gaming industry to date, and if approved by the relevant regulators, it will create the world's third-largest game company by revenue, behind China's Tencent and Japan's Sony.
However, Microsoft's acquisition application process can be described as full of dangers and twists and turns.
On December 8, 2022, the FTC sued to block the acquisition.
The FTC believes that the acquisition could not only give Microsoft an upper hand over consoles, but could also give an unfair advantage to more nascent gaming segments, such as subscription and cloud gaming, which would ultimately stifle innovation in the nascent gaming market.
On April 17, 2023, the South African Competition Commission (CCSA) announced that it approved Microsoft's application for this acquisition.
At present, the acquisition has been reviewed by regulators in 16 countries and regions. South Africa is the sixth country to approve the acquisition. Previously, Microsoft's same application has been approved by Saudi Arabia, Brazil, Serbia, Chile and Japan.
However, on April 26, 2023, the CMA gave Microsoft a blow: it vetoed Microsoft's application on the grounds that the merger deal would hurt competition in the cloud gaming market, because Microsoft would only offer Activision Blizzard games in Microsoft's own cloud gaming service for commercial reasons, and believed that Microsoft's acquisition of Activision Blizzard could bring higher prices and fewer options to British players.
Martin Coleman, chair of the panel of independent experts conducting the investigation, said at the time: "In the cloud gaming space, Microsoft already has a strong position, ahead of other competitors. The deal will strengthen Microsoft's strength, giving it the ability to undercut innovative new competitors. ”
Although Microsoft's application has been approved by some countries, regulatory approval from the United States, the United Kingdom and the European Union is the most critical if Microsoft is to realize its acquisition dream.
It seems that the mountains and rivers are exhausted, but they are bright. Microsoft was blocked by the United States and Britain, but unexpectedly waited for the green light of the European Union.
On May 15, 2023, the European Commission issued an announcement on its official website: "In accordance with the EU Merger Regulations, the European Commission approved Microsoft's application for the acquisition of Activision Blizzard. Approval is conditional on Microsoft fully complying with its commitments. ”
Microsoft added two new commitments to the European Commission: Microsoft will offer free licenses to EEA consumers to stream all current and future Activision Blizzard PC and console games that they have a license on any cloud gaming streaming service of their choice; At the same time, Microsoft will provide cloud gaming streaming service providers with corresponding free licenses to allow EEA players to stream any Activision Blizzard PC and console games. The duration of the commitment is 10 years.
Microsoft said in a statement that all of its commitments would be "applicable globally." Microsoft President Brad Smith claimed that Microsoft will "enable consumers around the world to play these games on any device of their choice."
After the EU's decision to approve Microsoft's acquisition of Activision Blizzard, EU Competition Commissioner Margaret Vestager said Microsoft had made concessions to ease the EU's concerns.
But Vestager's statement is markedly different from that of the CMA, which argues that Microsoft's concessions are not enough to allay concerns about Microsoft's monopoly.
Different antitrust paths
There has always been an impression that the EU has always been more scrutinized by the EU than the US and UK for takeover applications by tech giants.
In general, this is indeed a fact. Over the past few decades, the European Commission has been regarded as the toughest antitrust regulator, leading some companies to believe that acquisitions can withstand global scrutiny if they propose remedies that appease the EU.
Now, however, things have changed, at least in the United States.
Jay Modlar, senior counsel at the British law firm Norton Roche, said: "The US has historically been conservative on antitrust, and US companies tend to see the European Commission and other European authorities as more aggressive. But under the Biden administration, the opposite is true. Over the past two years, under the leadership of the FTC and the U.S. Department of Justice's Antitrust Division, antitrust issues have returned to focus. ”
In March 2021, US President Joe Biden from the Democratic Party appointed Lina Khan as chairman of the FTC, a British-born American female jurist known as the "antitrust predator" who actively led the litigation of large-scale cases.
According to US media reports, since Biden became US president, the FTC and the US Department of Justice have questioned 22 mergers and acquisitions, 15 of which have been successfully stopped.
Since the UK withdrew from the EU, it has also drifted away from the EU in terms of anti-monopoly thinking and practice.
On April 15, after the news of the EU's approval of Microsoft's acquisition of Activision Blizzard, CMA CEO Sarah Khadr said: "While we recognize and respect the European Commission's right to take a different view, the CMA stands by its decision. ”
"The Microsoft proposal, accepted today by the European Commission, will allow Microsoft to set the rules for this market for the next 10 years, subject to Microsoft games, Microsoft distribution platforms and Microsoft sales conditions for a long time, and a free, open and competitive market will no longer exist," Khadr said. ”
James Groves, a regulatory lawyer at Fieldfisher, said the EU's decision had no impact on the UK's position for the deal.
"For this deal to move forward, it has to move forward to some extent only in the EU, excluding the US and UK, but that's not commercially viable," Groves said. ”
So, to move forward with the deal, Microsoft and Activision Blizzard must defeat regulators in the U.S. and U.K. in court.
In the United States, the FTC is seeking to block Microsoft's acquisition, though some legal experts believe that based on historical precedent, the FTC may struggle to beat Microsoft in court.
The FTC's arguments in court remain focused on consoles, but both the U.K. and the EU have now determined that the deal has limited risk to Sony given PlayStation's market-dominant share.
In the UK, Microsoft and Activision Blizzard are currently appealing the CMA's decision, but they can only appeal on procedural grounds. Both companies have hired top lawyers to litigate in the UK Competition Appeals Court.
However, the likelihood that the two companies will overturn the CMA's decision in court is low. Historically, the British regulator's decisions have rarely been overturned, a lawyer said.
Anne Witte, a professor of antitrust law at HEC Norte, said: "If they win in the UK, things will be different; But if they lose, they still need to abandon the deal unless they decide to exit the UK market. ”
In addition, the CMA has sought significant remedies, such as a forced sale of the Call of Duty franchise. Microsoft and Activision Blizzard believe the move will make M&A deals impossible.
The English Channel widened?
However, the CMA has also raised doubts in the UK because of its decision.
On May 16, a day after the European Union announced its approval of Microsoft's deal to acquire Activision Blizzard, the House of Commons of the British Parliament held a hearing in which lawmakers questioned the CMA's two top leaders about whether the CMA's decision would damage the UK's international reputation; The UK government's Business and Trade Committee also cross-examined CMA President Marcus Boklink and CEO Sarah Khadr.
Competition and Markets Authority (CMA) CEO Kader Kader was questioned
They asked Bocklink and Khadr to explain why they had made a decision that was different from that of the EU, and repeatedly asked the CMA whether it had considered the impact of blocking such deals on Britain's international reputation.
Clearly, British politicians value Britain's attractiveness to multinationals, especially US tech giants. British Prime Minister Sunak and Chancellor of the Treasurer Hunt have repeatedly said they want Britain to be "Europe's Silicon Valley." And the EU's May 15 decision may be a bit embarrassing for these British politicians.
On April 26, upon learning that the CMA had vetoed Microsoft's proposal to acquire Activision Blizzard, Microsoft President Smith said it was "probably the darkest day in our 40 years of operating in the UK."
In an interview with British journalists, Smith also adopted a divisive approach, claiming that the UK's business environment is worse than that of the EU: "There is a clear message here - the EU is a more attractive place to start a business than the UK." ”
Next, Smith said sensationally: "It seems that the English Channel has never been wider. The implication is that post-Brexit Britain has gone far behind the EU in attracting American tech giants like Microsoft.
Activision Blizzard CEO Bobby Kotick's reaction at the time was even more sensational: "Sunak said that Britain wants to become Europe's Silicon Valley, but if deals like ours can't pass through the UK, then Britain will not become Europe's Silicon Valley, but will become the valley of death." ”
Their words, though exaggerated, clearly had some influence on British politicians.
On May 15, when the news of the EU's approval of Microsoft's acquisition of Activision Blizzard brossed, an official spokesman for British Prime Minister Sunak immediately said that although the UK has withdrawn from the EU, it does not mean that the UK will take a different approach than the EU in terms of how it treats multinational technology companies. He stressed that the UK remained a "friendly" country to tech companies.
At a May 16 hearing, when two CMA executives, Bocklink and Khadr, defended their decision, Conservative MP Bim Aframi asked: "Did you make the decision to veto Microsoft's acquisition with the intention that it could damage the UK's international image?" ”
Both Bocklink and Kadr have repeatedly argued that they do not want to create an environment that is "hostile" to tech companies.
"I think it's absolutely vital that we maintain a constructive dialogue with the tech industry, and that's something I've tried to do and have been doing regularly," Mr. Khadr carefully chosen.
It seems that whether in Europe or in the United Kingdom, the American technology giants are not actually in any "hostile" environment, but Boklink and Khadr, as regulators, face "hostile" critics at home and abroad.
(The author has worked as a senior reporter and editor in a number of well-known British media.) Author's WeChat public account: Wei Cheng looks at the world)