Microsoft’s Acquisition of Activision Faces Needless Challenges

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Emboldened antitrust bureaucrats on both sides of the Atlantic are flexing their muscles with challenges to Microsoft’s planned acquisition of the game developer Activision, maker of the popular Call of Duty franchise. In the United States, the Federal Trade Commission (FTC) is suing to stop the takeover, alleging:

With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers.

In the United Kingdom, the Competition and Markets Authority (CMA) is investigating a variety of issues as to whether the acquisition will result in a “substantial lessening of competition.” As part of this inquiry, the CMA yesterday published a summary of responses from the general public. It was interesting to see that “Of the 2,100 emails…reviewed, around three quarters were broadly in favour [sic] of the Merger and around a quarter were broadly against the Merger.”

Some of the points made by the public:

(c) it is unlikely that Microsoft would make Call of Duty exclusive due to its multiplayer nature. Making Call of Duty exclusive to Xbox would only create a gap in the market that could be filled by a rival cross-platform shooter game; …

(e) the Merger will push Sony to innovate, such as by improving its subscription service or creating more games to compete with Call of Duty;

(f) the Merger is a reaction to Sony’s business model for PlayStation, which has historically involved securing exclusive content or early access to popular cross-platform gaming franchises, such as Final Fantasy and Silent Hill;

(g) Microsoft’s plans to add Call of Duty to Game Pass are pro-competitive and will lower the price of accessing games for consumers;

One important point made was:

(l) the Merger is pro-competitive in the mobile segment because it will create new options for mobile gamers and allow Microsoft to compete against Google and Apple, which are the two dominant mobile platforms;

This aspect, rather than the availability of Call of Duty, is probably the key to the whole thing. Mobile gaming is a growth area. Microsoft/Xbox has virtually no presence in mobile gaming, while three quarters of Activision’s userbase, not to mention a sizeable portion of its revenue, derive from that area. This is most likely at the heart of the acquisition. Going from two large companies in the field to three is hardly a threat to competition.

Yet the FTC and the CMA have taken upon themselves the role of soothsayers, happy to present grand visions of the future that always show less competition resulting from any merger.  At least the FTC has to prove its case in court. The CMA, on the other hand, has the final say, with only a token show of an appeal process, as Meta found to its cost when it tried to acquire GIPHY.

So, the future of the American mobile gaming market could be determined by a small number of unaccountable British bureaucrats ignoring British public opinion. Perhaps the FTC should consider suing them?