Microsoft vs the regulators

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Microsoft vs the regulators

Microsoft is close to completing its $69 billion purchase of Activision Blizzard in what would be the biggest deal in gaming history. 

So what? Both the US’s Federal Trade Commission (FTC) and the UK’s Competition & Markets Authority (CMA) initially objected to Microsoft’s purchase of the Call of Duty publisher. But last week the regulatory tide suddenly changed. 

What happened? In April the CMA blocked the acquisition in Britain after concluding it could close down competition in the nascent cloud-gaming sector. Activision called the decision a “disservice to UK citizens” and said it showed that the “UK is clearly closed for business.” Two months later the deal faced an even bigger threat after Lina Khan, the FTC chair, asked a US court to block the acquisition on the grounds that Microsoft would limit its rival Sony’s access to Call of Duty. 

But last Friday a federal judge dismissed Khan’s request, finding that the FTC had failed to show the deal “will substantially lessen competition”. On Sunday, Microsoft and Sony announced a ten-year binding agreement to keep Call of Duty on Playstation, indicating that the Japanese company would no longer fight the takeover. 

The CMA suddenly became the only regulator standing in the way of the deal. On Monday it told a judge at the Competition Appeal Tribunal that it had “real confidence” that its concerns could be addressed. 

Regulatory overreach. When Khan was appointed as FTC chair in 2021, she promised to hold big tech accountable for antitrust behaviour. So far she’s losing. Apart from Microsoft, the FTC failed to block Meta’s purchase of a virtual-reality gaming company earlier this year. 

One US politician asked her last week if she was “bringing cases you expect to lose.” When Khan replied “no”, he countered: “Your track record seems to suggest otherwise”.

What now? Microsoft still has hurdles to jump through. The CMA will probably require it to give up some control of Activision’s cloud-gaming business within the UK. Bloomberg reported that this could involve selling off the cloud-based rights for games like Call of Duty to a third party. Happily for the tech giant, the barriers to a deal now appear more administrative than existential.

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