Activision: This is how the antitrust dispute between Microsoft and Sony works

More console war is not possible: Microsoft and Sony bicker before competition watchdogs about the Activision deal. Where the antitrust examination stands and how to proceed.

Microsoft is waving deals, Sony is wringing its hands: The cartel hearings on the planned acquisition of Activision Blizzard have come to a dispute between the two companies that have been at odds in the games console market for years. Microsoft wants to buy Activision Blizzard for $69 billion to solidify its market position. Sony, by far the most vocal opponent of the takeover, wants to prevent this at all costs.

A lot has happened in the past few months, which at first glance makes a successful takeover seem unlikely. The EU Commission first intensified its examination of the planned takeover in November, and in December the US Federal Trade Commission (FTC) announced that it would file a lawsuit against the planned deal. Finally, the British Competition and Markets Authority (CMA) expressed concerns about the deal: Higher prices, less choice and less innovation could be its consequences, the authority argued.

So three essential markets that view the deal critically. Nevertheless, Microsoft will probably be allowed to take over Activision Blizzard in the end, believes analyst Florian Müller. The blog operator FOSS Patents is an expert in patent and antitrust law and has advised companies such as Microsoft on app store issues. He also worked as a consultant for Blizzard until 1998. “The antitrust authorities first had to formulate concerns in order to enable detailed examination and negotiations on possible concessions from Microsoft,” “Something like this always reads more definitively than it is. In the end, it’s often approved.”

Microsoft is willing to compromise

Microsoft is making just such concessions on the assembly line. In order to secure the support of the powerful Communications Workers of America (CWA) union, Microsoft gave up its blockade of unions company-wide. Since then, the CWA has endorsed the proposed Activision deal.

In order to take away the fear of a Microsoft monopoly in the cloud gaming sector from cartel authorities and competitors, Microsoft signed contracts with Nvidia and most recently the cloud gaming providers Boosteroid and Ubitus. They stipulate that Microsoft’s and Activision Blizzard’s video games will be able to be streamed over the web on other platforms in the future, not just Microsoft itself Nintendo appear.

In fact, Microsoft is not only willing to maintain the status quo, but even actively to open up. This is how Microsoft systematically appeases its opponents in the cartel negotiations. EA, Tencent and Take-Two approve of the takeover. Only Sony hasn’t gotten Microsoft on its side, although similar concessions have probably also been made to the Japanese: “Call of Duty” should continue to appear on the Playstation for years to come and should even be offered in the Sony PlayStation Plus subscription. At a press conference in Brussels, Microsoft President Brad Smith held such a contract for the cameras. Only: Sony doesn’t want to sign it.

Sony’s fears

Sony describes the deal as anti-competitive. Microsoft could raise prices after the takeover, which could harm independent developer studios, the Japanese company argues in letters to antitrust authorities. The “Call of Duty” series is irreplaceable because of its huge reach. In the medium term, a “significant” portion of PlayStation users would switch to Microsoft if the takeover including “Call of Duty” games were approved.

In fact, Sony’s position is difficult to maintain: On the one hand, even after the takeover, Microsoft would still be the third-largest gaming company behind Sony and Tencent. On the other hand, Microsoft has already pulled out many of Sony’s complaints: Contracts that have already been concluded and offers that guarantee the long-term availability of “Call of Duty” on the Playstation and other platforms make Sony’s fears appear exaggerated. The Call of Duty games would become available on more platforms, not fewer, after an acquisition.

In the face of Microsoft’s contract offensive, Sony had to adjust its arguments. The contracts offered by Microsoft are not financially sustainable, the promises are insufficient. Sony recently caused a stir with a controversial response to the CMA. In it, Sony’s lawyers write that Microsoft can sabotage “Call of Duty” games on other platforms – for example by Microsoft letting the better developers only work on the Xbox version or subsequently placing intentional bugs in the PlayStation version. An own goal, says Florian Müller: “With such theories, Sony is leaving the serious area of ​​argumentation. That was a mistake, because the regulatory authorities see that Sony has run out of arguments.”

Microsoft’s position is not watertight: The FTC noted, for example, that Microsoft had already broken promises made before it took over ZeniMax Media (Bethesda). And Sony accuses Microsoft of only making compromises under pressure from competition watchdogs. Microsoft prefers to make public statements in the media instead of seriously negotiating with Sony, writes the Japanese company to the CMA.

How it goes on

Nevertheless, there are many indications that Microsoft still has good cards in the cartel negotiations, despite the headwind. According to a recent report by Reuters, at least the EU Commission has already decided to approve the deal. Competition authorities in Brazil, Chile, Serbia and Saudi Arabia have previously unconditionally approved the Activision purchase. That leaves the British CMA and the US FTC as the major markets. The biggest fears on the stock exchange are about the CMA, says Müller, since its decisions are difficult to challenge in court.

However, if the CMA approves the deal, the analyst also sees good opportunities with the FTC: “If Microsoft has approval from the EU and the UK, then the FTC could also give in. And even if the FTC remained stubborn, it would need the backing of the judiciary.” The US authority cannot prevent the deal directly, but must defend its position in court.

So the die may be cast as early as April: The EU Commission wants to announce its decision on April 25, the British CMA only one day later. Microsoft intends to finalize the deal by summer at the latest. Microsoft recently assured a US court that it would wait until at least May 22nd.

In any case, the outcome of the antitrust investigations will have an impact on future acquisitions by big tech companies, says Müller: “What will stick is that it was a protracted nail-biter. Both the potential buyers and the shareholders of the takeover targets then know that such Transactions are subject to considerable delays and great uncertainty. There will therefore be fewer takeover attempts of this magnitude.”


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