The European Commission diverges from the CMA’s decision in the Microsoft/Activision Merger

On 15 May 2023 the European Commission approved, under the EU Merger Regulation, Microsoft’s proposed acquisition of Activision Blizzard (‘Activision’).

Just weeks after the UK’s Competition and Markets Authority (‘CMA’) blocked this acquisition (which we have discussed here), the Commission has given Microsoft approval, conditional on Microsoft’s full compliance with its commitments to improve the current situation in relation to cloud gaming streaming services.   

How did the Commission’s decision differ?

The Commission, like the CMA, agreed that the acquisition could harm competition in the distribution of games via cloud gaming streaming services and that its position in the market for PC operating systems would be strengthened. 

However, the Commission diverged in its assessment of the remedies proposed by Microsoft to mitigate the competition concerns. Unlike the CMA, the Commission was satisfied that the 10-year licensing deals that Microsoft has offered to its competitors would comprehensively address the concerns it, like the CMA, had identified.  

Currently, Activision does not have a streaming capability, nor does it license its games to cloud game streaming services. By committing to grant free licenses to cloud game streaming providers and users, Microsoft would enable EEA gamers to stream Activision games using any cloud gaming services operating in the EEA, provided they have purchased them in an online store, or they are included in an active multi-game subscription in the EEA. 

Diverging from the CMA’s assessment of Microsoft’s proposed remedies, the Commission concluded that this commitment would allow, for the first time, streaming of such games in all cloud game streaming services. This, the Commission concluded, would generate competition, and expand opportunities for innovation and growth in the market. The Commission also concluded that even if Microsoft did withdraw Activision’s games from the market, notably Sony’s PlayStation, this would not significantly harm competition in the consoles market.

The Commission reached its conclusion after investigating the effectiveness of the remedies, collecting views from a large number of market participants and stakeholders. An independent trustee will be in charge of monitoring the implementation of the commitments.

What does this mean?

The transaction is still under review by the US Federal Trade Commission and Microsoft has stated that it intends to appeal the CMA’s decision, so the final outcome to this matter is still some way away.

Since the Commission announced its decision, however, both the CMA and the Commission have stated publicly that they wish to see closer cooperation between the authorities. Margrethe Vestager, the EU Competition Commissioner, has recently suggested that the Commission would like to have a formal cooperation agreement with the CMA which builds on the relationship that has existed between the authorities since the UK exited the EU in 2020. Sarah Cardell, the CEO of the CMA, has also called on the UK government to prioritise a formal cooperation agreement with the Commission.   

Therefore, there appears to be a desire for closer alignment between the agencies and both have commented that divergence, such as that in Microsoft / Activision, tends to be the exception rather than the rule. Nonetheless, Microsoft / Activision does serve as a reminder that alignment between the CMA and the Commission cannot be assumed, even if the number of cases in which there have been divergent outcomes since Brexit is low, and that global transactions require careful deal planning. 

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