Yet another attempt to block the Microsoft and Activision merger has failed. U.S. District Judge Jacqueline Scott Corley dismissed the second attempt by Call of Duty gamers to block the merger based on inadequate evidence of harm. In Corley’s statement, she concluded “The day after the merger they can play exactly the same way they played with their friends before the merger.”
This decision comes after Microsoft’s merger announcement in January 2022, and a prior complaint brought forward by the same gamer group suggesting that a proposed merger between Microsoft and Activision-Blizzard would adversely affect them. The initial complaint decision was handed down in March of this year and was also dismissed for insufficient evidence. This group has vowed to continue its challenge of the merger, proclaiming that there is very strong evidence that Microsoft has breached U.S. antitrust law.
The gamers’ concerns mirror those of the Federal Trade Commission (FTC). Late last year, the agency announced that it would seek to block Microsoft’s acquisition of Activision-Blizzard. Citing the merger as the “largest ever in the video gaming industry” and that it “would allow … Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.” The FTC is scheduled to conclude its investigation and host its evidentiary hearing on August 2nd. The decision to litigate the matter by the FTC parallels the action brought forward by the UK’s Competition and Markets Authority (CMA) which bucked the international trend to allow the merger to proceed.
Microsoft has suggested that it may carve out Activision-Blizzard gaming titles from their proposed ‘Games Pass’ subscription service for UK customers as a result of the CMA’s decision to block the merger. This would signify a major loss for UK customers, especially considering a mere journey across either channel to an EU country would mean that consumers are able to access a larger variety of titles with the same subscription. This only serves to highlight how the decision to intervene has harmed consumer interests.
The gamers’ complaint cited Microsoft’s acquisition of ZeniMax and Bethesda Softworks, whose popular gaming titles were made exclusive to Microsoft consoles after their acquisition. A track record that, in their opinion, would make it hard to rely on what they’re promising, suggesting that “Microsoft would have both the means and motive to harm competition”. They contend that Microsoft could change the pricing associated with purchasing larger titles, degrade game quality, and change the terms of service or the release time on rival Microsoft consoles they had done with ZeniMax gaming titles such as Starfield and Redfall. A situation in their mind, that would make their gaming experience less affordable and enjoyable on any device that isn’t sold by Microsoft. With a growing market for cloud gaming options as well as disruption in console gaming, this merger would attract a greater number of players to a ‘one-stop shop’, boosting console gaming’s prospects against rival gaming systems.
The U.S. court’s reluctance to oppose the merger should give consumers a great deal of comfort. The courts have to date taken a strong stance against those who are looking to arbitrarily interfere in market forces that would make the gaming industry more efficient and could help produce higher-quality games for consumers. However, the upcoming FTC hearing could lay the stage for whether the U.S. will diverge from the U.K. or join with most countries in approving the merger.
Around the world, Microsoft has been mostly met with very little resistance to the merger. Countries like Japan, South Africa, and Brazil, as well as single market regions like the EU, have green-lit the merger. The only other nation where Microsoft has been met with as much resistance as we’ve seen here in the US has been the UK, who shockingly decided to block the merger from proceeding. Microsoft immediately pledged to appeal the decision and the hearing is set for the beginning of the week of July 24th.
The UK regulator’s decision to block the merger represented a tremendous lack of understanding of the gaming industry, due to the very narrow market definition of console gaming. With a rapidly growing and diverse cloud gaming industry burgeoning online, console game systems are actively competing for consumers with more easily accessible gaming options on other devices. An expanded cloud library is part of that competition. Consumers are considering cloud gaming, consoles, PCs, and mobile platforms for gaming and regulatory decisions should reflect these market realities.
Should the UK court rule in favor of insisting on a carve-out of Activision-Blizzard content from the Microsoft cloud gaming service, the US courts will be faced with a major dilemma in either siding with the precedent set by the CMA or going with the rest of the world and allowing customers greater access and freedom.
Ben Dennehy is the Communications Manager at the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.