Gaming the System?: Microsoft’s Quest to Accquire Activision

Almost two years ago, Microsoft embarked on its quest to acquire Activision Blizzard, worth $75 billion, and only closed the deal on October 13, 2023, after jumping through a plethora of regulatory hoops. With Activision’s ownership of popular videogame franchises such as Call of Duty, Candy Crush, Diablo, and Overwatch, Microsoft will bolster its videogame business to become the third largest gaming company worldwide. This acquisition would have modestly pushed Microsoft’s percentage of gaming revenue as a proportion of overall revenue in the last fiscal year from 7% to 10%. Still, Microsoft’s goals remain ambitious as the company plans to incorporate Activision games in the company’s multi-game subscription (similar to Netflix’s business model). 

 Regulators are weary of granting Big Tech companies additional power, as indicated by the almost twenty-two-month time period to get global merger approval. The U.K.’s Competition and Markets Authority’s announcement on October 13, 2023, was the most recent and final approval for the acquisition, after the Competition and Markets Authority initially blocked the merger. Microsoft only gained this approval after offering to forfeit cloud-streaming rights for certain popular Activision franchises in much of the world. The altered deal instead has Ubisoft purchase Activision’s PC and console content that will be created over the next fifteen years. This alteration prompted the United Kingdom’s Competition and Markets Authority (CMA) to renew its investigation into the Microsoft-Activision merger in August of this year. The Chief Executive of the CMA, Sarah Cardell, proclaimed that her agency was the only one around the world that resulted in such a merger between the companies at hand that would ensure competitive consumer prices, better services, and freedom to choose. This is especially important due to the forecast of tremendous growth over the next few years for Britain’s cloud gaming industry; just between the beginning of 2021 and the end of 2022, the number of cloud gaming users tripled.

This past June, the acquisition was approved in the United States after initially being rejected by the U.S. Federal Trade Commission (FTC). The FTC made arguments that Microsoft “could raise prices for people who don’t use Microsoft’s hardware to access Activision games or cut off their access entirely.” Before the Federal Trade Commission appealed to the Circuit Court, the U.S. District Court determined that the agency, the FTC, had not sufficiently shown that Microsoft’s acquisition of Activision would hurt competition in the console or cloud-gaming markets. Moreover, the Ninth Circuit Court of Appeals refused to blockthe merger back in July. Yet, the Federal Trade Commission could still seek to dismantle of the merger in its administrative court. However, the option could be very time-consuming and could be further appealed to an outside court. Additionally, the disassembling of the merger would most likely be rejected, considering the Circuit Court’s opinion. Plus, it is unlikely that the FTC will continue to pursue this approach because it often drops the lawsuit after the Commission loses the preliminary injunction to block the merger. This outcome is not without precedent, since the Federal Trade Commission often faces difficultiesin the courtroom in a generally pro-business country. 

Microsoft has claimed its notion that this merger is actually healthy for the economy because their game streaming service will allow more people to access the games via more platforms that have the games.

Nevertheless, Victoria Graham, spokesperson for the FTC, professed that the FTC remains weary of the acquisition because the Commission views it as a threat to competition in the market. In response, Microsoft has claimed its notion that this merger is actually healthy for the economy because their game streaming service will allow more people to access the games via more platforms that have the games. Thus, consumers can refrain from purchasing expensive, physical consoles and save money. The expansion of gaming on streaming services could dramatically transform the videogame industry. 

Suzie Camp

Suzie Camp is a 2L at the University of North Carolina School of Law. In addition to her work on JOLT, she is president of the Environmental Law Project.