Microsoft’s Bid for Gaming Dominance: The Battle for Activision Blizzard

Established in 2008, Activision Blizzard boasts a portfolio of renowned game studios and hit titles such as “Call of Duty,” “World of Warcraft,” “Overwatch,” and “Candy Crush Saga.” The company has repeatedly shattered sales records and, in March 2018, became the most valuable game company in Europe and America. This acquisition is poised to further solidify Microsoft’s gaming empire.

The scale of the proposed acquisition is massive, involving numerous entities and jurisdictions. Microsoft needs approval from regulatory bodies in 19 countries to proceed. These regulatory agencies often seek input from other game companies before making their final decisions. While most enterprises expressed no major concerns about the acquisition’s impact on the industry, Sony, the market leader, voiced strong opposition. They argued that Microsoft’s acquisition of Activision Blizzard would result in severe monopolization, limiting consumer choices to the Xbox platform for popular titles like “Call of Duty.”

Microsoft promptly responded, emphasizing its relatively smaller scale compared to Sony and Nintendo, and assuring that the acquisition would not lead to monopolistic practices. The company highlighted its commitment to fair competition and maintaining a diverse gaming ecosystem. This exchange escalated the rivalry between Microsoft and Sony, further intensifying the battle for gaming dominance.

As of April, Brazil, Serbia, Saudi Arabia, and Chile had approved Microsoft’s acquisition of Activision Blizzard. Recently, South Africa and Ukraine followed suit. However, the crucial decisions lie with three regulatory bodies: the Competition and Markets Authority (CMA) in the UK, the European Commission, and the Federal Trade Commission (FTC) in the United States. On April 26th, the CMA became the first regulatory authority to intervene, blocking the acquisition. Citing concerns about potential adverse effects on competitors and emerging gaming companies, the CMA dealt a significant blow to Microsoft’s aspirations.

Upon hearing the CMA’s decision, Activision Blizzard’s stock price plummeted by nearly 10%. Microsoft, however, is not giving up and is planning to appeal the CMA’s ruling in the UK Competition Appeals Tribunal. Yet, this process is not straightforward. The UK’s antitrust regulations are robust, and even the application for an appeal can take several months. Microsoft must gather evidence, including undisclosed content regarding Sony’s lobbying efforts with regulatory bodies, to convince a panel of judges that the CMA’s actions were unreasonable, unlawful, procedurally flawed, or unfair. However, the chances of Microsoft winning the appeal are slim, given the CMA’s high success rate of 67% since 2010.

With the CMA’s decision, Microsoft’s hopes now lie with the European Commission. All eyes are on Brussels as the EU is set to make its decision on May 22nd. Before the decision, more relevant companies will express their opinions on the acquisition. The FTC in the United States continues to gather information, and a hearing on the acquisition is scheduled for August 2nd. Microsoft initially aimed to complete the merger by the end of 2023, but the CMA’s ruling has cast a shadow over this timeline.