One Difference Between EU & CMA Led To Different Outcomes on The Microsoft Activision Deal

Considering that the EU has just cleared the Microsoft Activision deal and that the UK’s CMA ‘prevented’ it a few weeks ago, you would think that the two led to different conclusions. In fact, many of the two regulators made the same conclusions, and it was only one big sticking point that made the difference between rejection and approval.

First things first, let’s compare what they thought about the console market. Both the CMA and the EU concluded that this deal would overall not affect the console market enough to harm competition. This argument for the console theory of harm, that Sony trumpeted in their case vs the deal, was soundly rejected by both regulators.

There are some differences in how they got there. For example, the CMA concluded that Activision’s Call of Duty franchise in particular is a significant driver of revenue for Sony, and that losing access to Call of Duty would harm players as well as Sony. The EU found that Call of Duty does not have as huge a following in their region.

Of course, we should remember that this inquiry was speculatory as Microsoft stated they would not block future Call of Duty games from PlayStation. Both EU and CMA concluded that Microsoft would want to keep publishing Call of Duty on PlayStation because it would be a loss for a significant number of the game’s player base.

Interestingly enough, both regulators also came to the conclusion that they didn’t actually have to protect the Call of Duty player base from any potential moves towards exclusivity. This is because their community is not that big a fraction of the total market for video games. If you ask me, that should be a learning moment for gamers that regulators and laws don’t exist for consumers to get everything they want exactly the way they want it.

Both the EU and CMA agreed that there was a concern when it comes to Microsoft potentially having an unfair advantage when it comes to cloud gaming. In fact, they came to two similar conclusions on this end; that if Microsoft made Activision games exclusive it could harm other cloud gaming providers, and that Microsoft could dominate the field of cloud gaming operating systems. Remember that this is not referring to the platforms where you can play a game on, but the platforms that host cloud gaming. Nearly all of them currently use Windows.

The big difference between the EU and the CMA, is that the EU chose to implement remedies to address these concerns, while the CMA chose to prevent the deal altogether.

To quote the EU decision, they chose these remedies, which were among those suggested by Microsoft to them:

• A free license to consumers in the EEA that would allow them to stream, via any cloud game streaming services of their choice, all current and future Activision Blizzard PC and console games for which they have a license.
• A corresponding free license to cloud game streaming service providers to allow EEA-based gamers to stream any Activision Blizzard’s PC and console games.

On the other hand, the CMA chose to reject all of Microsoft’s proposed remedies, and prevent the merger outright. For this we will reference their summary of their decision, since we won’t need all the finer details.

To paraphrase the CMA, they gave three points:

• Microsoft’s deal to share games with other cloud gaming companies is too limited, because it is only for ten years, and for select Activision games. CMA suspects Microsoft will take advantage of opportunities outside the contract later.
• Microsoft’s contract with other cloud gaming companies stipulates games have to be purchased or acquired via subscription. This does not account for new ways that consumers could gain rights to games.
• Microsoft will have no reason to make their games run on operating systems other than Windows, and will just allow the Windows OS to dominate as the only operating system good for hosting cloud gaming.

As you can see, these are fundamentally different choices on what was essentially the same conclusion. The CMA also claimed that it would not be worthwhile to monitor Microsoft’s compliance, but the EU does not even hint that they would have any issues with the task.

We also have to point out that there are political dynamics at play in these decisions, as the UK very recently voted for a Brexit, leaving the European Union. While EU and UK publicly state they would like to cooperate on issues like business regulation across their regions, Brexit is premised on the idea that UK believes it can handle its affairs better separately than with the EU.

But the CMA may soon find opposition to their own work from within their own country. We recently reported on Rishi Sunak’s plan to ‘strategically steer’ the regulator.

Florian Mueller has shared the news that the CMA’s chair, Markus Bokkerink, and CEO, Sarah Cardell, will be on a hearing with the Business and Trade Committee of the UK Parliament. This could very well play out like the US Finance Committee’s hearing where they took Lina Khan to task for her decision on the Microsoft Activision deal.

With the EU’s decision, the road for the Microsoft Activision deal just extended a little bit wider. But perhaps Microsoft and Activision are happy about that, because they still have a path to get the deal finalized in the end.