Microsoft's $75 Billion acquisition of Activision Blizzard approved by EU

The European Union's antitrust watchdog approved Microsoft's planned $75 billion acquisition of Activision Blizzard on Monday, giving the two companies a win after the deal hit a regulatory roadblock in the U.K.

The decision comes weeks after the U.K. regulator rejected the agreement, saying it would crimp competition in the country's gaming market. Microsoft has said it would appeal that decision. Monday's approval in Brussels won't have any direct legal bearing on that process, and antitrust lawyers say Microsoft faces long odds in overturning the British decision.

Still, the EU's decision means Microsoft has cleared at least one of the three biggest regulatory hurdles it faced in pursuing the deal. The U.S. Federal Trade Commission has sued Microsoft to block the deal and scheduled an August hearing for the case in its administrative court.

The divergence in the EU and U.K. decisions could create new confusion over the world's most prominent regulators' approach to big deal-making.

Before the U.K. left the EU, its antitrust regulators largely stood on the sidelines of big deals like this one. But since its split from Brussels, London has quickly grown into one of the most critical global regulators regarding mergers and acquisitions.

For the companies, the EU approval could make it easier for Microsoft to present the U.K. decision as an outlier, including during a U.K. appeal process, some antitrust lawyers and analysts said. The deal faces daunting prospects of clearing such an appeal since the process is focused narrowly on the procedure.

The U.K. decision was based on what regulators said would be the anti-competitive nature of the deal in that country only. But some antitrust lawyers say there are legal questions about whether Microsoft could effectively carve out the U.K. market. The U.K. is the sixth-largest videogame software market in the world by country, according to industry tracker Newzoo. China is the largest, followed by the U.S.

The EU approval could also factor into Microsoft's arguments before the FTC's administrative law judge, and it could influence other regulators, such as Australia and New Zealand, which haven't announced decisions on whether to approve the deal.

"Formally, they don't look at other jurisdictions," said Herbert Hovenkamp to the Wall Street Journal, an antitrust legal scholar at the Wharton School of the University of Pennsylvania, about the FTC. "But informally, they will, especially if several are going the same way."

Other legal experts are less optimistic about whether the EU decision would affect the deal's prospects in the U.S. "No decision by a foreign authority is going to exert much influence on the FTC's position," said Jonathan Rubin, a partner at Washington, D.C., law firm MoginRubin LLP.

The European Commission said the deal wouldn't harm Microsoft's competitors in console gaming and multigame subscription services. It did, however, say that the combination of the companies could harm competition in cloud gaming and that Microsoft's position in computer gaming would be strengthened.

To resolve those issues, the Commission said it accepted Microsoft's proposed remedy of giving free licenses to Activision's games for ten years to rival cloud-gaming distributors serving consumers in the European Economic Area, which includes the EU and three non-EU countries. The commitments also say Activision games available for streaming via the cloud must have the same quality and content as those available for traditional downloading.

"Ultimately, the commitments will unlock significant benefits for competition and consumers by bringing Activision's games to new platforms, including smaller EU players, and to more devices than before," the Commission said.

Sony Group, which makes PlayStation consoles that compete with Microsoft's Xbox machines, was one of the deal's most prominent opponents. The Commission said Microsoft would have no incentive to refuse to distribute Activision's games to Sony, including those from its blockbuster "Call of Duty" franchise. Even if it did, "this would not significantly harm competition in the consoles market," the Commission said.

The U.K.'s competition authority said Monday that it stands by its decision to reject the deal. It also criticized the EU's ruling, saying it would allow Microsoft to set the market's terms and conditions for the next decade.  

Key Points

• The European Union's antitrust regulator approved Microsoft's planned $75 billion acquisition of Activision Blizzard on Monday.
• The deal is still subject to review by the U.S. Federal Trade Commission, which has sued Microsoft to block the acquisition.
• The EU's approval is a significant victory for Microsoft and could help it become a dominant gaming industry player.
• The deal has raised concerns about competition in the gaming industry, with some critics arguing that it could lead to higher prices and fewer choices for consumers.
• It remains to be seen whether the FTC will approve the deal, but the EU's approval is a positive sign for Microsoft.