Microsoft's Activision Acquisition Was Questionable From the Start
The United Kingdom’s Competition and Markets Authority (CMA) has “provisionally concluded” that Microsoft’s acquisition of video game maker Activision-Blizzard “could result in higher prices, fewer choices, or less innovation for UK gamers.” This announcement captures what many already knew: Microsoft’s takeover of Activision would harm competition in the gaming industry.
It was one year ago that Microsoft announced the acquisition of Activision and its portfolio of mega-titles, including Call of Duty, Guitar Hero, Candy Crush, World of Warcraft, Overwatch, StarCraft, and others. If the union proceeds, it would mark the largest such transaction in technology history, and Microsoft — already one of the world’s largest and most dominant companies — would emerge as the gaming world’s goliath, too.
Hence regulatory concern. Citing the same antitrust matters as their American and European Union counterparts, the CMA’s conclusion pumps the breaks on the fraught $68.7 billion acquisition. The transaction has already prompted scrutiny from the United States Federal Trade Commission, which announced its intent to block the merger. Microsoft has also had to deal with a private lawsuit filed by a group of US-based video game enthusiasts, who argued that the merger would give Microsoft “far-outsized market power in the video game industry” and “the ability to foreclose rivals, limit output, reduce consumer choice, raise prices, and further inhibit competition.”
At the moment, the Activision deal isn’t the only Microsoft move facing regulatory scrutiny. Also under the spotlight: Microsoft’s video messaging service, Teams. The allegation: That Microsoft unfairly leverages its Office suite software to force consumers to use Teams, thereby crowding out competitive video products. Additionally, Microsoft is being investigated for antitrust complaints lodged by European cloud providers, who contend that Microsoft’s habit of bundling cloud software with its operating system makes competition impossible.
These queries across the full spectrum of Microsoft’s products and services can seem coincidental — except that for decades, Microsoft has had a checkered record on antitrust matters. Almost two decades ago, the EU fined Microsoft $613 million for antitrust violations and ordered remedies related to its Windows operating system. Despite the nine-figure fine, Microsoft continued their practices and breached that agreement twice, which earned it additional fines in 2006 (~$357 million) and again in 2008 (~$1.1 billion). As if all that weren’t enough, the EU fined Microsoft $730 million in 2009 for breaching similar commitments on web browser practices.
But for the sake of argument, set aside these past fines and actions. Is there ample cause for concern about the current Microsoft takeover of Activision? Indeed, Microsoft’s own behavior in the video game market suggests there is. Following its $7.5 billion acquisition of the video game company ZeniMax in 2021, Microsoft began restricting certain games from ZeniMax’s Bethesda studio to Xbox only — a blatant contravening of the public assurances Microsoft gave to EU regulators. With Activision clocking in at ten times the size of ZeniMax, it’s little wonder that gamers and regulators are worried.
The broader industry context matters here, too. Through its Xbox Game Pass platform, Microsoft already has a whopping 60 percent share of gaming’s streaming market. If Microsoft acquires Activision, the latter’s “Battle.net” would be subsumed under Microsoft — and conveniently eliminate a competitor to Microsoft’s Xbox Game Pass. To put it simply, Microsoft would assume near-total control of the video gaming market, and it would crowd out competitive platforms, games, and services.
At times, regulatory action related to antitrust can feel capricious, arbitrary, or unnecessary. But we have these institutions and the protections they uphold for a good reason, and the proposed Microsoft-Activision merger is a prime example. Regulators want to have a fair playing field, and as Microsoft has demonstrated in its software and other services, the Redmond giant doesn’t take those issues seriously enough. Even when sanctioned, Microsoft’s leadership displays a cavalier attitude to their market power and routinely steps over the line.
The unity among the UK, EU, and US regulators is itself a powerful indicator: It says something that, at a time of various global conflicts and tensions, two continents appear ready to join forces to ensure market competition for consumers. Microsoft ought to pay heed, but given their past misbehavior, that seems as unlikely as the merger itself passing muster.
Jared Whitley has worked in the US Senate, the Bush White House, and the defense industry. He has an MBA from Hult International Business School in Dubai.
