The European Commission announced that it has opened an in-depth investigation into Microsoft’s proposed acquisition of Activision Blizzard over anticompetition concerns.
Both Microsoft and Activision Blizzard develop and publish games for PC game consoles and mobile devices, as well as distribute games for PCs. In addition, Microsoft also distributes games for consoles, offers the Xbox gaming console and related services as well a wide range of products and services, including the PC operating system Windows and the cloud computing service Azure. In January, Microsoft announced it was acquiring Activision Blizzard in an all-cash transaction valued at $68.7 billion.
In a statement, the Commission said its preliminary investigation showed that the proposed acquisition “may significantly reduce competition in the markets for the distribution of console and personal computer (PCs) video games, including multi-game subscription services and/or cloud game streaming services, and for PC operating systems.”
The Commission stated that it is particularly concerned that, by acquiring Activision Blizzard, “Microsoft may foreclose access to Activision Blizzard’s console and PC video games, especially to high-profile and highly successful games, such as ‘Call of Duty.’”
The Commission’s preliminary investigation further finds, “Microsoft may have the ability, as well as a potential economic incentive, to engage in foreclosure strategies vis-à-vis Microsoft’s rival distributors of console video games, such as preventing these companies from distributing Activision Blizzard’s console video games on consoles or degrading the terms and conditions for their use of or access to these video games,” the Commission stated.
Concerning multi-game subscription services and/or cloud game streaming services, in particular, the Commission said it is concerned that, “by acquiring Activision Blizzard, Microsoft may foreclose access, to the detriment of its rival distributors of console and PC video games that offer such services, to its own PC and console video games, which are key for the provision of the nascent services of multi-game subscription and cloud game streaming.”
“Such foreclosure strategies could reduce competition in the markets for the distribution of console and PC video games, leading to higher prices, lower quality and less innovation for console game distributors, which may in turn be passed on to consumers,” the Commission added.
Lastly, the preliminary investigation has raised concerns that the proposed acquisition “may reduce competition on the market for PC operating systems. In particular, the Commission is concerned that Microsoft may reduce the ability of rival providers of PC operating systems to compete with Microsoft’s operating system Windows, by combining Activision Blizzard’s games and Microsoft’s distribution of games via cloud game streaming to Windows. This would discourage users to buy non-Windows PCs.”
Microsoft Response
In responding generally to anticompetition concerns, Microsoft stated in a blog post that it “will continue to engage with regulators with a spirit of transparency and openness as they review this acquisition. We respect and welcome the hard questions that are being asked.”
“The gaming industry today is robust and dynamic. Industry leaders, including Tencent and Sony, continue to expand their deep and extensive libraries of games, as well as other entertainment brands and franchises, which are enjoyed by players everywhere,” Microsoft added. “We believe that a thorough review will show that the combination of Microsoft and Activision Blizzard will benefit the industry and players.”
Next Steps
The Commission was notified of the proposed transaction on Sept. 30. The next step will be for the Commission to carry out an in-depth investigation into the effects of the transaction to determine whether its initial competition concerns are confirmed.
The Commission has until March 23, 2023, to make its decision. The opening of an in-depth inquiry does not prejudge the outcome of the investigation. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.