Passed the Critical Point but Uncertain... MS Approved to Acquire Blizzard in Europe

Microsoft's (MS) plan to acquire Activision Blizzard, a 'tech mega-deal' worth approximately $69 billion (about 92 trillion KRW), has passed a major hurdle. Unlike the UK, which blocked the acquisition due to antitrust concerns, the European Union (EU) regulatory authorities have approved it. However, the final outcome of the acquisition remains uncertain.

On the 15th (local time), the EU Commission announced its approval of MS's acquisition of Activision Blizzard. The EU Commission accepted MS's proposal to amend related licensing agreements to allow cloud gaming platforms to offer streaming services without paying royalties to MS. Margrethe Vestager, Vice President in charge of competition policy, explained the approval by stating, "MS has presented solutions to alleviate antitrust concerns in the cloud gaming sector."

[Image source=Reuters Yonhap News]

This decision drew attention as it came just two weeks after the UK Competition and Markets Authority (CMA) opposed MS's merger, citing concerns that it would hinder innovation in the cloud gaming market and reduce consumer choice. The Wall Street Journal (WSJ) commented that "the decisions of the EU and the UK diverged," and that "(the EU's approval) means MS has resolved at least one of the three major regulatory hurdles it faced while pursuing the acquisition."

Accordingly, there is speculation that this may influence decisions in other countries. MS must obtain approvals from the UK, the US, and the EU to complete the acquisition of Activision Blizzard.

Some analysts suggest that MS may leverage the EU's approval to portray the UK's rejection as an anomaly in future appeal procedures. This could strengthen MS's position in the US Federal Trade Commission (FTC) lawsuit, which is set to intensify starting in August. Herbert Hovenkamp, a professor at the Wharton School of the University of Pennsylvania, stated, "The FTC officially does not consider other jurisdictions, but unofficially, especially if several are taking the same path, it will (consider them)."

However, there are also criticisms that this is insufficient to overturn overall antitrust concerns. The regulatory stance of the UK and the US, which have already issued disapprovals, is more stringent. Jonathan Rubin, a partner at the Washington-based law firm MoloLamken, emphasized, "No decision by foreign authorities will significantly impact the FTC's position."

Sarah Cardell, Chief Executive of the UK CMA, also dismissed the EU's decision on the same day, stating, "We acknowledge and respect the EU's decision, but the CMA stands by our decision." MS announced its intention to appeal immediately after the UK CMA's decision and must officially file the appeal by next week. Tom Smith of Geraldine Partners, an antitrust lawyer, estimated that the appeal process would take approximately 6 to 12 months. Liam Dean, an analyst at market research firm Omdia, predicted, "If the appeal fails, MS will either have to terminate the deal or develop the UK as a separate market, which is unrealistic."

Earlier, MS announced in early last year its plan to acquire Activision Blizzard for about $69 billion. This would be the largest deal in the tech sector and was expected to become the 'deal of the century' if completed. Activision Blizzard is a developer owning popular games such as Call of Duty, Candy Crush, and World of Warcraft. MS initially planned to complete the acquisition by mid-year.