(Bloomberg) — Microsoft Corp.’s best chance. to get approval for its deal with Activision Blizzard Inc. worth $69 billion by US regulators is to convince the Biden administration to accept a settlement in which the Xbox maker promises it won’t withhold its popular titles from rivals.
That’s a long shot, given that Biden’s antitrust authorities don’t like such deals — especially since the Ticketmaster blast this month put the spotlight back on the Justice Department’s botched 2010 settlement with Live Nation Entertainment Inc.
Antitrust officials in the UK and Australia have raised concerns that the acquisition would give Microsoft a huge advantage in cloud gaming, a nascent industry. This is a particularly sensitive area for Federal Trade Commission Chairwoman Lina Kahn, who earlier this year filed a lawsuit to block Meta Platforms Inc. from acquiring a popular fitness app to gain an edge in the fledgling virtual reality market.
While Khan did not comment specifically on the Activision deal, she said at a conference in October that the FTC is focusing on the ways digital platforms use mergers to maintain their dominance during periods of tech transition.
“Right now we’re seeing this period of technology transition — whether it’s in the context of the cloud, voice assistants or virtual reality,” Khan said. “We need to be especially vigilant everywhere, but especially in the context of the merger.”
Microsoft announced in January that it plans to buy game publisher Activision Blizzard, which has developed popular franchises such as Call of Duty and World of Warcraft. The acquisition will be the company’s largest deal and one of the 30 largest deals of all time. Although Brazilian antitrust officials have approved it, other competition regulators, including the United Kingdom and the European Union, have raised concerns that Microsoft could hold onto popular titles from rivals, notably Sony Group Corp’s Playstation.
Microsoft said it has put forward a proposal that would keep Call of Duty on Playstation for the next 10 years. But that kind of deal might not placate regulators, Bloomberg Intelligence analyst Jennifer Rhee said.
“This is a deal that requires behavioral concessions, and the FTC does not accept behavioral concessions,” Rhee said. “They have no choice but to sue.
The FTC declined to comment.
Microsoft said in a statement that it was “ready to address the concerns of regulators, including the FTC and Sony, to ensure that the deal closes with confidence.” Microsoft has indicated it will still go after Sony and market leader Tencent Holdings Ltd. in the gaming market after the takeover is complete.
Biden administration antitrust officials have taken an aggressive approach to companies seeking to merge, often rejecting proposed settlements in favor of lawsuits. The Justice Department has brought a record 10 merger challenges since June 2021. The Federal Trade Commission also blocked two major deals that had sought regulatory approval based on promises that the merged company would be fair to its competitors — Nvidia Corp’s purchase of Arm Ltd. from SoftBank Group Corp.’s bid. and Lockheed Martin Corp. to buy Aerojet Rocketdyne Holdings Inc.
Then there’s the furor surrounding Live Nation’s Ticketmaster unit after the failed launch of ticket sales for a Taylor Swift concert last week. The ticketing giant merged with Live Nation in 2010 after the Justice Department blessed its proposal to license Ticketmaster’s software to other companies and promised not to retaliate against venues that choose alternative ticket providers. Some lawmakers and advocates are now calling for the merger to be stopped, saying regulators should not have approved it in the first place.
Microsoft’s deal with Activision Blizzard also includes another aspect that has piqued the interest of regulators — big technology platforms using acquisitions to dominate emerging industries, in this case cloud gaming. Several tech companies have launched forays into subscription gaming services using cloud technology, including Microsoft, Sony, Alphabet Inc’s Google. and Amazon.com Inc. – though few managed to break into the mainstream, and in September Google announced it would shut down its Stadia service.
Microsoft’s Xbox Game Pass, which includes cloud gaming in its Ultimate package, is the market leader with more than 25 million subscribers. In part, that’s because Microsoft’s dozens of game studios provide a direct content pipeline. Activision Blizzard is expected to add significantly to the value of the subscription service.
UK regulators, who must also approve the acquisition, highlighted concerns about cloud gaming as one of the main reasons they extended their review until March 2023. The deal could “tilt or significantly increase the concentration” of cloud gaming in Microsoft’s favor. before competitors have a chance to develop, the UK’s Competition and Markets Authority said.
©2022 Bloomberg LP
Add Comment