EU approves gaming strategy, investigating Activision and Microsoft merger

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This week, the European Union (EU) is taking more active positions in the video game industry. The EU is targeting the industry with gaming and esports legislation and an antitrust investigation into the $68.7 billion Microsoft and Activision Blizzard merger deal.

EU passes resolution on games and electronic sports

On Thursday, the legislative body passed a resolution recognizing the cultural and economic value of video games and esports. In passing the legislation, Members of the European Parliament (MEPs) will be tasked with developing a long-term investment and regulatory strategy to promote the industry in Europe.

The resolution passed easily: 560 votes in favour, 34 against and 16 abstentions. In part, this is because the resolution is not binding. However, it is a strong sign that MEPs are paying attention to the industry.

The rapporteur of the Committee on Culture and Education (CULT), Laurence Farreng, presented her case before the plenary session of Parliament on November 9. She pointed to the underrepresentation of women, the economic and cultural value of gaming and esports, and the cross-border nature of Europe as reasons. why MEPs should adopt the resolution.

European Commissioner Breton Thierry and several MEPs also spoke in favor of the resolution, echoing points from the original CULT resolution. In particular, several advocated video games as a way to attract and retain highly-skilled talent. They also expressed interest in using this as an opportunity to “measures against addiction” — Specifically banning loot boxes.

Resolution is only the first step in a long list of procedures. In an interview with Esports Insider, Nepomuk Nothelfer, a European legal researcher commissioned by the EU to write the report, said implementation would be the next big challenge.

“I have a feeling that the real work will start after the resolution. Most of the time it is before the resolution because now you have a plan and you can act on it. But in esports it is still so complicated… I have a feeling that the later stages will take a long time, ”Nothelfer explained.

EU antitrust investigation

However, European regulators did not wait for the resolution to regulate the industry in other ways. On Tuesday, the EU announced an in-depth antitrust investigation into the $68.7 billion merger of Microsoft and Activision Blizzard. This research follows a similar probe in the UK.

In a statement, the European Commission said it was concerned the deal could reduce competition in the distribution of console and PC games, including subscription services like Game Pass, and for PC operating systems.

While Sony and Apple aren’t mentioned in the announcement, it’s clear that the EU is concerned about Microsoft making Call of Duty exclusive to Xbox and PC. The report highlights the financial incentives that Microsoft has to do so. In particular, the commission has not addressed whether the exclusivity of the game itself is under fire or whether it is an extraordinary case. Sony’s acquisition of Bungie was not discussed, although the deal was much smaller at $3.6 billion.

“We must ensure that opportunities continue to exist for current and future distributors of PC and console video games, as well as rival providers of PC operating systems. The goal is to ensure that the gaming ecosystem remains vibrant for the benefit of users in a rapidly evolving industry. Our in-depth investigation will assess how the deal affects the gaming supply chain,” concluded Margrethe Vestager, European Commissioner for Competition, in a press release.

Reactions to the investigation

Following the announcement, Activision Blizzard CEO Bobby Kotick confirmed in a statement that the company would work with Microsoft to comply with the EU investigation.

Microsoft has chosen an interesting strategy to combat the fears of regulators: play with its competition.

“We continue to work with the European Commission on the next steps to address any valid market concerns. Sony, as an industry leader, says it’s concerned about Call of Duty, but we’ve said we’re committed to making the same game available on the same day on both Xbox and PlayStation. We want people to have more access to games, not less,” a Microsoft spokesperson said in a statement to the edge.

This move by the EU is somewhat expected. Europe was the most likely governing body to intervene in the deal. Of course, the UK investigation may have encouraged further action. While an investigation is a first step, it doesn’t mean the deal is dead. The EU highlights that many merger investigations often result in no action being taken. However, it seems likely that the EU wants to include some stipulations in the deal, particularly around exclusivity.

Microsoft has 90 business days (March 23, 2023) to respond. Notably, this works in Microsoft’s favor. Under the agreement, the breakup fee increases from $2.5 billion to $3 billion on April 18, 2023.

With the EU, UK, and potentially the US FTC making moves, both Activision Blizzard and Microsoft will have their work cut out for them between now and March.

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