Game On: Microsoft’s acquisition of Activision-Blizzard is in jeopardy

Announced early last year, Microsoft’s proposed $68.7 billion acquisition of Activision-Blizzard would be the most expensive tech merger to date . But a deal so large has far-reaching implications for competition and numerous legal hurdles to cross to gain approval from regulators internationally.

While competition regulators in South Africa, Japan, Chile, Brazil, Saudi Arabia and Serbia quickly approved the deal, the European Union put up a fight before eventually granting antitrust approval in May. Microsoft’s next opponents are the United States Federal Trade Commission and the United Kingdom Competition and Markets Authority, both of which have taken hardened stances.

The FTC filed a lawsuit in December to block the deal, and last month requested a restraining order and injunction in federal court to stop the deal from going through before its July 18 deadline. A judge temporarily granted the request, with an administrative hearing set to begin Aug. 2.

Microsoft seems to be in favor of the federal hearing, stating, “Accelerating the legal process in the U.S. will ultimately bring more choice and competition to the gaming market. A temporary restraining order makes sense until we can receive a decision from the court, which is moving swiftly.”

Ultimately, the FTC can’t block the merger on its own – it needs the backing of a federal court to actually enforce a stop to the deal.

In April, the U.K.’s CMA decided to block the acquisition. In response, Microsoft president Brad Smith buttered up the EU by stating that the decision was the “darkest day in our four decades in Britain,” and that “the European Union is a more attractive place to start a business than the United Kingdom.” That strategy apparently worked when the EU approved the deal less than a month later on May 15.

Activision and Microsoft are, of course, appealing the CMA’s decision. The appeal’s hearing is set to begin on July 24.

All of this opposition to the merger has less to do with current gaming trends and more to do with projected future trends. There is, of course, the simple fear that Microsoft would stop allowing Activision-Blizzard to launch flagship games like Call of Duty and Diablo on PlayStation, but that seems unlikely given Microsoft’s continued support of Minecraft on competitor devices long after acquiring developer Mojang in 2014.

Concerns reach far beyond the game-console exclusivity space and into technology more broadly – especially cloud gaming. The CMA has estimated that Microsoft already controls around 60% to 70% of cloud gaming services, and it’s determined that adding control of franchises like Call of Duty and World of Warcraft would threaten to make it nearly 100%.

Although cloud gaming isn’t currently a massive draw for consumers, numerous adjacent tech trends such as the widespread popularity of streaming movies and TV shows suggest it could be in the near future. Microsoft is clearly convinced of such, as Microsoft Gaming CEO Phil Spencer very publicly admitted in 2021 the company was more fearful of the cloud gaming efforts of Google and Amazon than the console gaming competition of Sony and Nintendo.

Although I’ve been primarily an Xbox gamer since 2006, I’d really prefer if the Activision-Microsoft merger fell through. Microsoft is nicest to its consumers when it struggles, and the company already has a solid headstart on cloud gaming. That said, I also believe the fear of Microsoft forming an early monopoly is somewhat overstated – there was a time when Netflix was the one and only dominant force in streaming movies and shows, and now half a dozen viable competitors exist.

But what’s really irksome is Activision-Blizzard. In recent years, the company has seen more than its fair share of drama, culminating with the 2021-22 legal battle between them and the California Department of Fair Employment and Housing over alleged sexual misconduct and pay discrimination at its workplace.

News of the merger conveniently went public in the midst of Activision-Blizzard’s stock prices tanking. Personally, I’d like to see the once-great company tackle its issues on its own rather than expecting Microsoft to buy them out and clean house.

Riordan Zentler can be reached at riordanzentler@gmail.com.