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Tuesday, March 21, 2023

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Microsoft's Activision Blizzard deal now facing "in-depth" investigation by EU

The European Commission has announced that, following its initial investigation into Microsofts proposed $69bn acquisition of Activision Blizzard, it will now be opening a more “in-depth” Phase 2 probe to determine the deals likely impact on competition.

In a statement on its website, the European Commission said it had made the decision after its preliminary investigation showed Microsofts acquisition may “significantly reduce competition on the markets for the distribution of console and PC video games, including multi-game subscription services and/or cloud game streaming services, and for PC operating systems”.

It drew particular attention to its concerns Microsoft has a “potential economic incentive” to prevent competitors from accessing Activision Blizzards “high-profile and highly successful games” upon closure of the deal, specifically highlighting the Call of Duty series – something Microsoft has repeatedly insisted it will not do.

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The European Commission also expressed concerns these same “high-profile and highly successful games” could be be made exclusive to Microsofts multi-game and cloud streaming services to the detriment of similar rival services, and that the deal could potentially also be leveraged to discourage users from buying non-Windows PCs.

“Such foreclosure strategies could reduce competition in the markets for the distribution of console and PC video games,” it wrote, “leading to higher prices, lower quality and less innovation for console game distributors, which may in turn be passed on to consumers.”

As a result of its preliminary findings, the European Commission will now launch an in-depth investigation to determine whether its initial competition concerns are confirmed. This second phase will last 90 working days, with a deadline for a decision now set at 23rd March next year.

The European Commissions announcement follows a similar move by the UKs Competition and Markets Authority (CMA), which launched its own “phase 2” investigation into Microsofts acquisition in September, after it determined the deal could “[give] rise to a realistic prospect of a substantial lessening of competition in gaming consoles, multi-game subscription services, and cloud gaming services.”

The CMAs investigation – which recently sought public opinion on the matter – has a statutory deadline of 1st March next year. Several countries – including Brazils Administrative Council for Economic Defence (CADE) – have already approved the deal.

Acknowledging the European Commissions expanded investigation in an open letter shared on Activision Blizzards investor website, CEO Bobby Kotick wrote, “We have been working closely with Microsoft to actively engage regulators in other key countries to answer their questions and provide them with information to assist with their review. People from across our business units and functions have been involved in this regulatory work, and I want to thank each of you for your tireless work and commitment to completing this merger, which we continue to expect to close in Microsoft’s current fiscal year ending June 2023.”

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