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Microsoft announced its intention of acquiring game publishing giant Activision Blizzard King on January 18th, 2022, in an all-cash deal worth around $68 billion. This would make it the largest acquisition by far in the industry’s history, eclipsing several times over Microsoft’s $7.5 billion purchase of Bethesda parent company Zenimax in 2021. And not without good reason: Activision Blizzard is one of the biggest video game companies in the world, and rakes in several billion dollars of revenue each year thanks to several blockbuster game franchises.
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The deal came in the wake of widespread allegations of misconduct at Activision Blizzard, including discrimination and sexual harassment, and a lawsuit against the Santa Monica company by the California Department of Fair Employment and Housing the previous year.
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The complaints against Activision Blizzard went all the way to the very top of the company’s leadership with CEO Bobby Kotick. Kotick is accused of turning a blind eye to alleged rampant misconduct and toxic culture at Activision Blizzard for years. It is believed that Kotick will depart Activision Blizzard if and when Microsoft’s buyout concludes, likely with a hefty payday.
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The long road to regulatory approval
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The U.S. FTC
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In April 2022, U.S. senators Elizabeth Warren, Bernie Sanders, Sheldon Whitehouse, and Cory Booker wrote a letter to FTC Chair Lina Khan expressing concerns over the acquisition. The letter stated in part that,
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The Federal Trade Commission (FTC) should assess whether the ways in which these companies have failed to protect the rights and dignity of their workers are driven by monopsony power or amount to anticompetitive harms in our labor market, and if so, if the merger will exacerbate these problems.”
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Eight months later in December 2022, the FTC formally announced its filing of a lawsuit to block the deal. In its press release the agency stated,
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Microsoft has already shown that it can and will withhold content from its gaming rivals. Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”
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The FTC also inaccurately stated in that release that Microsoft had violated assurances it had given to European antitrust regulators regarding the Zenimax acquisition, when in fact that deal had been cleared without conditions.
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The trial is set to begin in August 2023.
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The CMA and EU
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The U.K. Competition and Market Authority (CMA) announced a second phase of its investigation into the deal in September 2022. The British regulator had initially found that the deal could damage competition, echoing Sony’s complaints that Call of Duty alone plays an essential role in driving competition between the console makers. (This in spite of the fact that the Nintendo Switch has sold over 122 million units to become the third best-selling video game console of all time…all without a single Call of Duty game in its library). It was suggested that Microsoft might be required to divest the Call of Duty franchise and/or offer other remedies.
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Meanwhile, EU regulators filed a formal complaint opposing the deal in February, citing concerns that Microsoft may elect to block access to the Call of Duty franchise. In its remarks the EC said Microsoft control of the IP could lead to “lower quality and less innovation for console game distributors,” seemingly echoing Sony’s claims that Microsoft could deliberately sabotage its games on PlayStation by making them buggier.
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In response to the ECs concerns, Microsoft entered into a series of deals with other parties including Nintendo and Nvidia to secure Call of Duty on other platforms for the next ten years, much like the offer it had made to Sony. The ploy seems to have been at least in part successful, because in late March the CMA updated its provisional assessment in Microsoft’s favor in light of “a significant amount of new evidence in response to its original provisional findings.”
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However, in its final report the CMA withheld approval saying that Microsoft owns 60-70 percent of global cloud gaming services and repeating claims that it would “find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.”
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Microsoft has said it will appeal the decision.
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We remain fully committed to our acquisition with @ATVI_AB and will appeal today's determination by the CMA. Here's our statement. pic.twitter.com/ylvDP5RUqQ
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— Brad Smith (@BradSmi) April 26, 2023
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The European Commission has postponed its initial April 25th deadline back to May 22nd. It is thought that the EC may issue an antitrust warning against Microsoft.
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Six countries approve the deal while gamers take to a courtroom to stop it
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Saudi Arabia, whose government-run Savvy Gaming Group is heavily invested in gaming and esports around the globe, became the first territory to approve the deal in August last year. Since then five more countries have followed suit: Brazil. Chile, Serbia, Japan and South Africa.
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And in one of the more unexpected plot twists in the Activision Blizzard deal saga, a group of ten gamers filed a lawsuit against Microsoft in December 2022 to block the merger, claiming that “the video game industry may lose substantial competition” should the acquisition be allowed to proceed, “and Microsoft may have far-outsized market power, with the ability to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition.”
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A judge dismissed the case in March 2023, saying that the plaintiffs had not shown sufficient evidence of harm to the industry should the deal complete. The plaintiffs refiled the lawsuit in April, this time with the support of Sony, which helped to provide documents pertaining to their case.
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Updates in "gamer lawsuit" meant to block Microsoft-Activision deal
– After initial dismissal, amended suit to be filed today
– Gamers' lawyers were to depose Nintendo of America pres. Doug Bowser, but Nintendo refused after dismissal
– Sony's been sharing docs, to M's "surprise" pic.twitter.com/TOOsWPOXmZ\n
— Stephen Totilo (@stephentotilo) April 10, 2023
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Sony has been the fiercest opponent of the merger, and no one can accuse PlayStation CEO Jim Ryan of not doing everything in his power to block it. The former politician has at times been very persuasive with regulators, it seems. Although some of the back and forth between Microsoft and Sony has provided some pretty amusing headlines over the course of the last 15 months or so since the deal was first announced, with the latter even accusing the Redmond company of “obvious harassment” at one point.
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Is the conclusion of the Activision Blizzard deal in sight?
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At this point many of us are weary of this ongoing saga. Here’s hoping we finally see an end to this thing one way or the other sometime in 2023. Regardless of the outcome, the Activision Blizzard deal might very well mark the close of Microsoft’s big spending spree in the video game industry—an effort that has brought the likes of Mojang Studios and Bethesda Games Studios under the Microsoft wing.
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Anyways, we now turn it over to you. What are your thoughts on this massive acquisition attempt? Are you in favor of Microsoft bringing ABK into its fold, or against? What are your reasons? Feel free to share your thoughts down in the comments below.
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Featured image via DW.com.
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