In January 2022, Microsoft announced that it had begun plans to acquire Activision Blizzard in a deal worth $68.7 billion. Since then, however, myriad obstacles have stood in the way of the almost-realized goal. Whether it’s Sony PlayStation boss Jim Ryan, who is trying his best to prevent the deal, or market regulators, who are also against it.

Back in April this year, despite reports stating that Microsoft’s acquisition of Activision Blizzard was a near-realised goal, UK market regulator the CMA sensationally blocked the deal due to Microsoft’s excessive influence in the market and overshadowing other companies.
A few weeks later, the FTC tried to block the acquisition attempt by Microsoft.

During the lawsuit, Xbox Game Studios boss at Microsoft Matt Booty said he actively encouraged Xbox’s CFO to spend money to strengthen the Xbox Game Pass library so it could compete with Sony’s PlayStation Plus subscription service.

Relatedly, the FTC lawsuit also reveals that Microsoft was willing to purchase studios including SEGA, Bungie and others in order to knock Sony out of the gaming market for good. Additionally, the FTC believes that Xbox exclusivity for Starfield harms Activision’s takeover of Blizzard.

Microsoft President Brad Smith is due to meet UK Chancellor Jeremy Hunt this week to discuss the CMA’s decision to block the purchase.

Microsoft President Smith is also expected to meet with Microsoft’s legal team to discuss any counter strategies. This meeting is also likely to discuss the ‘final’ option of withdrawing Activision Blizzard titles from the UK market.

“One of the extreme options could be to bypass the UK order and proceed with the deal or to withdraw Activision from the UK market.”

the report said.

Microsoft is expected to consider the EU’s findings in approving the purchase. In its ruling, the EU said the deal could “kick-start” competition in cloud gaming and streaming. However, the CMA said the deal would give Microsoft an unfair advantage over other companies such as Sony or Nintendo

The EU found that Microsoft “would have no incentive to refuse to distribute Activision’s games to Sony” and that “even if Microsoft decided to withdraw Activision’s games from PlayStation, this would not significantly harm competition in the console market”. However, EU regulators, like those in the UK, found that the acquisition could harm competition in the distribution of PC and console games via cloud gaming services.

The EU’s decision comes after the UK’s Competition and Markets Authority last month blocked the deal because it risked reducing competition in the nascent cloud gaming market. The CMA said it would be commercially advantageous for Microsoft to make Activision’s key games, such as Call of Duty, exclusive to its own cloud gaming platforms. However, the CMA said the acquisition would not reduce competition in the console market.

The Commission has examined many areas related to the transaction, including the impact on competition in the console market and the rapidly growing cloud gaming market.

Although Microsoft lags behind with its Xbox in the last generation of consoles compared to Sony’s PlayStation 5 and Nintendo Switch, it has staked its future on the so-called cloud gaming market.

The EU Commission found that the Activision takeover would not reduce competition in the console market given Sony’s dominance with the PlayStation.

EU regulators found that the acquisition would harm Microsoft’s ability to compete in the distribution of PC and console games via cloud gaming services. According to the Commission, one of the ways competition would be harmed is if Microsoft made these Activision games exclusive to its own platform.

However, the European Commission said Microsoft had offered remedies to allay competition concerns. Consumers who have purchased or will purchase an Activision game will be able to stream those titles on any cloud gaming platform of their choice. Microsoft will also offer cloud gaming platforms free licenses to stream Activision games if the user has purchased them. That is, gamers don’t necessarily have to stream the game where they bought it.

A senior European Commission official told reporters on Monday that the move would increase competition in the market and allow streaming platforms that did not have access to Activision’s games to now have them.

The country’s antitrust regulator said Microsoft’s commitment to offer access to Activision’s multibillion-dollar “Call of Duty” franchise on leading cloud gaming platforms would not effectively address its concerns.

Activision CEO Bobby Kotick told employees that this isn’t the news the companies wanted, but it’s only temporary.

“We will be reviewing our UK growth plans. Global innovators large and small will take note that – for all its rhetoric – the UK is apparently closed for business”,

the company said in a separate statement.

Shares of Activision, which also produces the games “Candy Crush,” “Overwatch” and “World of Warcraft,” fell 12 percent to $76.65, moving away from Microsoft’s offer price of $95 a share. If the losses persist, the video game publisher will have to remove nearly $8 billion from its market valuation.

“We expect that Microsoft will continue to fight this”,

Evercore ISI analyst Kirk Materne said in a note.

If Microsoft opts out it would free up more than $60 billion in cash flow that could be returned to investors or invested in AI-related offerings, he noted.

The Activision deal is the biggest tech-related deal the Competition and Markets Authority (CMA) has blocked, the latest sign that the British watchdog is ready to crack down on big tech after it blocked Facebook-owner Meta’s acquisition of Giphy in 2021.

Europe is expected to make a decision on the Activision deal by May 22. That’s not the only problem facing the tech giant and the franchise, as the US Federal Trade Commission is also trying to block it.

Google’s proposal comes in response to the CMA’s enforcement action against the company last year, which was aimed at the conditions it placed on developers for in-app payments.

“Google’s complete control over in-app payments raised concerns this unfairly restricted app developers – by forcing them to use Google Play’s billing system – putting distance between them and their customers and reducing competition, to the detriment of Google Play users,”

said Ann Pope, Senior Director of Antitrust at the CMA.

The proposal offers two options: Developer Only (DOB) or User Choice (UCB), which will give users the option to choose between alternative billing and Google Play Billing (GPB).

The fee reductions are part of Google’s proposal to address the concerns raised by the CMA. Google has also asked for the option to phase in the proposed commitments, with the service initially available to non-game app developers and then extending to game apps no later than October 2023.

The CMA has launched a consultation on Google’s proposal and invites developers and other interested parties to respond by 19 May. After considering the responses, it will decide whether to accept the commitments and resolve the case.
The proposal is an extension of the alternative billing choice that Google already offers in the European Economic Area (EEA) and in other parts of the world, such as South Korea and India, where Google was forced to offer alternative billing due to a $162 million fine for antitrust practices.

Google’s proposal requires developers to meet appropriate consumer protection requirements, and fees and terms of service will continue to apply to support investment in Android and the Play Store.

The CMA is seeking feedback on Google’s proposed reduction in service fees, the proposed process for reporting to Google on turnover associated with in-app purchases, the use of information screens, the UCB billing choice screen, and the process Google proposes for monitoring compliance with commitments.

“Both DOB and UCB would allow app developers the opportunity to use billing systems of their choosing (and DOB would allow them to choose not to offer GPB at all), breaking the link that the GPB requirement currently creates between access to Google Play and the use of Google’s proprietary billing system for in-app sales of access to digital content or services,”

wrote the CMA in its Notice of Intent.

“Moreover, third-party payment processors will be able to offer their services to potential app developer customers for in-app purchases of digital content or services within an app distributed on Google Play, allowing app developers to benefit from increased choice and competition.”

the CMA continued.

Both DOB and UCB will enable app developers to use billing systems of their choice, breaking the link that the GPB requirement currently creates between access to Google Play and access to millions of Android users.

Google proposed a third-party cookie ban on Chrome that was intended to come into effect this year, but was postponed to 2023 because of mixed responses to the proposals.

The Competition and Markets Authority (CMA) launched an investigation last year over concerns that the Privacy Sandbox would cause online advertising spending. In fact, the CMA said that Google accepted a number of legally binding commitments relating to the development of the Privacy Sandbox such as more transparent process, engagement with third parties and publishing test results.

Google also agreed not to remove third-party cookies until the CMA is satisfied that its competition concerns have been addressed. CMA said in a statement on Friday, 11 February.

“The commitments we have obtained from Google will promote competition, help to protect the ability of online publishers to raise money through advertising and safeguard users’ privacy.”

The watchdog’s CEO, Andrea Coscelli commented that it is under no illusions that their work is done as it moves into a new phase where it will keep a close eye on Google as it develops company’s proposals.

Google announced the Privacy Sandbox to try balance these concerns. It’s an initiative to create technologies that both protect user privacy and give companies and developers tools for online advertising to replace third-party cookies.

One thing the CMA was concerned, was that the proposals could undermine the ability of online publishers, such as newspapers, to continue to produce good content in the future, with reducing the public’s choice of news sources.

Google is trying to balance privacy concerns with the demands of the AD industry. The company said on Friday that is has been working with the CMA and the Information Commissioner’s Office to address these concerns.

Facebook bought Giphy, a service for making and sharing animated GIFs, reportedly for $400 million in May 2020. The idea was to integrate it with its photo-sharing app, Instagram. Stuart McIntosh, chair of the independent investigation on Facebook-Giphy for the CMA (The Competition and Markets Authority) said:

“The tie-up between Facebook and Giphy has already removed a potential challenger in the display advertising market. By requiring Facebook to sell Giphy, we are protecting millions of social media users and promoting competition and innovation in digital advertising.”

Facebook, recently rebranded as Meta, said it may appeal the CMA’s decision.