Mergers, acquisitions, and partnerships have been lately considerably increasing in numbers. The notably fast evolution in technology has pushed big technology companies (techcos) and most recently telecom companies (telcos) to look for avenues to spearhead the competition into adopting emerging concepts and practices. The scale of such events and the significantly large amounts spent in those deals have been increasingly raising alarm signals from the competition, regulatory authorities, and the public in general. Microsoft acquisition of Activision Blizzard dates early back to January 2022. The multi-billion-dollar deal aiming to project Microsoft into the gaming industry and later on, into the Metaverse hasn’t come unscathed. The deal between two of the biggest players in the technology and gaming industries has been closely inspected since by antitrust bodies looking to see the competitive implications of the deal and detect any possible foul play before its even close. More recently, the Microsoft – Activision Blizzard deal has been facing an antitrust probe in the United Kingdom by UK Competition and Markets Authority (CMA) with a potential investigation that could delay the deal from being closed at the targeted deadline.
Microsoft Acquires Activision Blizzard in January
Microsoft has been anticipating the Metaverse rush with a series of products and acquisitions. Microsoft Mesh which was introduced towards the end of 2021 as a precursor of a fully-fledged Metaverse experience by allowing Microsoft Teams users to interact with 3D avatars. The raging race with the other companies such as Meta has pushed the American company to up the ante by acquiring a big fish, Activision Blizzard for a mammoth USD 68.7 billion. The deal announced in January has been later approved by Activision Blizzard shareholders in April of the same year.
When the deal passes through the last hurdle, the regulatory scrutiny, it will allow Microsoft to boost its gaming industry, adding millions of games to its Xbox platform which could then be extended to smartphones and other devices. At a later step, cloud-hosted games and more importantly the Metaverse become serious targets given the 3D development experience of Activision Blizzard employees. Landmarks such as Call of Duty, World of Wordcraft, or even Candy Crush can become part of the Microsoft gaming suite.
Microsoft – Activision Blizzard Deal: A Blow to Sony and PlayStation
Microsoft’s latest acquisition could be targeting its competitors in the hindsight, more specifically Sony and the PlayStation gaming platform. A large number of Activision Blizzard games are among the top ranked on PlayStation, notably Call of Duty. The company however tried to avoid regulatory litigations and anti-competition insinuations by promoting complete transparency on how the competition will fare after the deal is sealed, including the continuous availability of Blizzard games on other platforms.
It is clear however that the completed deal would potentially destabilize Sony’s position in the gaming industry affecting its future plans. Sony tried to counteract by buying video game maker Bungie for a much lower USD 3.6 billion.
Antitrust Regulations vs. Big Technology Companies
The relation between big tech companies and antitrust regulations has been more strenuous than ever. The constant drive of techcos to monopolize the market has been increasingly opening the eyes of regulators to inspect their business models and activities. Resourceful techcos like Google, Amazon, Facebook and others can easily abuse their platform to promote their products at the expense of other companies. The recent lawsuit in Japan between kakaku.com and restaurant chain Hanryumura illustrates the destructive effects of manipulation.
The US Antitrust Laws
The federal trade commission (FTC) has been trying to protect consumers from illegal competition through a series of antitrust laws. The laws aim at prohibiting any combination or contract that may lead to any monopolization endeavor. The FTC mentions on its website banning “unfair methods of competition” and “unfair or deceptive acts or practices.” As far as mergers are concerned, the Clayton Act prohibits mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly.”
Anti-Competition Laws in the UK
The UK Competition and Markets Authority has provided detailed guidelines for joint venture business. The provided guidance includes a list of Dos and Don’ts that two collaborating companies. These include making sure that “any reduction in competition brought about by the collaboration is no more than is absolutely necessary to achieve its goals” and being “clear, specific, and honest about their pro-competitive goals and the limits of their collaboration.”
Outlook of the Microsoft-Activision Blizzard Probe in the UK
The CMA has started asking for public input and will decide the next steps to take on September 1. If any suspicious activity is found, a more through investigation could be launched before the deal is expected to close in 2023. The probe will certainly not stop there as institutions like the FTC could also open their own investigation on the mega-deal. Until then, Microsoft and Activision Blizzard would have to continue to convince regulatory authority of the transparency of the deal.
The relation between antitrust agencies and big tech companies hasn’t been rosy lately. The latest Microsoft – Activision Blizzard deal is a clear example of such attrition between both camps. It is rather the dubious activity behind these big mergers and acquisitions that made regulatory policies more constraining. Suspicions of misbehaving will only increase scrutineering and Microsoft won’t be the last big company under the radar. The latest clampdown on Facebook’s transfer of data to the US by Irish regulators is a story that will rapidly unfold soon.
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