*This is an AI-powered machine translation of the original text in Portuguese

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On October 13, the British antitrust authority Competition and Markets Authority ('CMA') approved the completion of the acquisition of game developer and publisher Activision Blizzard Inc. by Microsoft Corporation for approximately US$ 69 billion.

Microsoft is a technology company that operates in various sectors. In the context of this operation, the company stands out in the supply of products and services in the electronic games industry. In this segment, the company develops, publishes and distributes games for personal computers ('PCs'), mobile devices and consoles, as well as offering the Xbox console and online gaming services. Activision Blizzard, in turn, owns franchises of great prestige in the gaming community, such as Call of Duty, Overwatch, World of Warcraft and Candy Crush.

Therefore, the operation concerns a broad spectrum of relevant segments within the games industry, implying several overlaps or integrations in markets - especially in the development and distribution of games. Due to the nature of the industry and the global reach of the companies in the supply of games, the operation was notified in several jurisdictions around the world, where there was the identification and analysis of competitively sensitive points and concerns raised by the incorporation of Activision Blizzard as a subsidiary of Microsoft.

Electronic games have different levels of investment in their development process and are classified based on this factor, ranging from indie games (lower budget products) to 'AAA' games. Triple A" games can reach tens of millions of dollars in investment, and their development can take years to complete[1]. Activision Blizzard's most prominent game series is Call of Duty, a 'triple A' game franchise in the FPS (first-person shooter) category that has sold over 400 million copies[2]. As an independent developer, Activision Blizzard has historically promoted the distribution of games in the series on hardware devices supplied by both Microsoft's Xbox and Sony Interactive Entertainment LLC's PlayStation, as well as PCs.

The possibility of making component titles of the franchise available is in itself a major economic factor in the games distribution market; however, the content made available on a given platform is the biggest factor influencing the consumer's choice of certain games hardware. As a result, concerns have been raised - both by competitors and by international antitrust agencies - about the possibility of Microsoft adopting market foreclosure practices, since this situation would supposedly provide an incentive for the acquirer to make access to its subsidiary's products exclusive to itself, influencing the games distribution market as well as that of video game hardware devices. In other words, the reservation made by competitors in a plurality of segments of the games industry was due to the concern that Microsoft would hinder or prevent other publishers or hardware device suppliers from accessing Activision Blizzard's content.

This concern took center stage in the analysis carried out by the Federal Trade Commission ('FTC'), the US competition authority, and led to the signing of a non-exclusive agreement between Microsoft and Sony in January 2022. Although the terms of the agreement were not made publicly available, representatives of the acquiring company consistently stated that a binding commitment had been made to maintain the supply of game franchises, such as Call of Duty, on platforms owned by competitors[3]/[4].

The games industry, together with the entertainment sector as a whole, has been subject to profound changes and innovations in recent years, with prospects for the development of new markets that have the potential to be central to the future scenario under construction. Of particular note is the cloud gaming segment, a technology that makes it possible to process games on devices such as televisions and tablets, making it possible to play remotely, without the need to purchase or use local hardware such as consoles, PCs or smartphones.

Despite the current infancy of this technology, Microsoft has a cloud gaming service through Xbox Cloud Gaming. Here again, concerns were raised about possible incentives for Microsoft to close down the market in relation to Activision Blizzard's products. The issue of distributing electronic games on cloud platforms has been the subject of close scrutiny by the European Commission. The conclusion was that the company did indeed have the capacity and incentives to adopt measures harmful to the competitive environment, such as, for example, through the exclusivity of Xbox Cloud Gaming in making Activision Blizzard franchises available - with the possibility of indirectly benefiting by diverting demand to another of its activities, through the Windows system on personal computers.

This understanding of the Commission implied the imposition of remedies for the approval with restrictions of the operation, embodied in the requirement that free licenses be guaranteed to enable access to Activision Blizzard games, through cloud gaming, to consumers and competitors located in the European Economic Area.[5]/[6]. An agreement was reached between Microsoft and other cloud gaming platform providers, such as Nvidia and its GeForce NOW brand, which ensures a global, royalty-free license to stream games on the platforms.[7]. Based on these agreements and the imposition of remedies, the operation was approved by the European Commission in May 2023.

The barriers to gaming services on cloud platforms in the UK jurisdiction were even greater. The CMA, based on concerns raised by the possibility of market closure and issues relating to the cloud gaming segment, disapproved the Transaction in April 2023[8]. As a result, Microsoft and Activision Blizzard lodged an appeal for consideration by the antitrust appeal body, the Competition Appeal Tribunal ('CAT').[9]. As a result, a further agreement was reached which made it possible for the first instance authority to re-examine the operation[10].

The agreement that led to the re-examination - and subsequent approval - of the operation under British jurisdiction was concluded between Microsoft and Ubisoft, a French electronic games publisher that has several 'triple A' game franchises, such as Far Cry and Watch Dogs, as well as its own online store[11]. Under this agreement, Activision Blizzard's cloud gaming rights were excluded from the scope of the Transaction and acquired by Ubisoft, so that the supply of the acquired company's cloud streaming games outside the European Economic Area will no longer be offered by Microsoft, but by the French company.

Considering the exclusion from the scope of the operation of the point of greatest concern to the British authority, on October 13, the acquisition was approved by the CMA[12]the only authority of global relevance where the operation was still pending[13]as a result of which the largest transaction in the history of the games industry was allowed to close.

In the United States, although there are currently no obstacles to the completion of the operation, the FTC has filed a lawsuit against Microsoft to reject the acquisition of Activision Blizzard. Unlike the way the Brazilian antitrust system works, in the US the final verdict is given by the judiciary, and not by the agency itself. In December 2022, the FTC, based on the possibility of depriving competitors of access to Activision Blizzard products, issued Complaint[14] seeking judicial disapproval of the operation[15]. However, the agency was denied its request for an injunction to block the acquisition[16]. Thus, although a final decision on whether or not to approve the Microsoft/Activision Blizzard case is still pending in US courts, there are currently no obstacles to its completion, which is why it was recently made official.

In Brazil, the operation was notified to the Administrative Council for Economic Defense (CADE) and approved without restrictions in October 2022[17]. The agency considered the markets for publishing games, digital distribution of games, online advertising and licensing for consumer products to be horizontally overlapping. In terms of vertical integration, the markets for publishing and distributing games, publishing games and consoles, and publishing games and online advertising were analyzed. In all the scenarios analyzed, it was concluded that it was impossible for Microsoft to exercise market power, as well as the absence of elements that would allow the inference of vertical foreclosure.

Despite concerns in other jurisdictions about the possibility of market foreclosure, CADE took the view that, despite their popularity, Activision Blizzard's games, especially the Call of Duty franchise, "would not be essential assets for Microsoft's current and potential competitors in the console and digital game distribution markets" and held that "even if Activision Blizzard's catalog of games were to become exclusive to Microsoft's ecosystem after the Transaction, SG/Cade considers that such exclusivity would not result in a substantial reduction in competition levels".[18].

Cloud gaming services were assessed as components of the games distribution market, in an analysis of the possible closure of the downstream market. Despite recognizing the existence of the segment, there was no detailed analysis of the situation and future projections for this market, considering the current scenario of low consumer adoption of cloud gaming services.

[1] In this sense, see: T.C. Why video games are so expensive to develop. The Economist, September 25, 2014. Available at: https://www.economist.com/the-economist-explains/2014/09/24/why-video-games-are-so-expensive-to-develop. Accessed on Oct. 24, 2023; ALVA, Britanny. What makes a AAA game a AAA game? Epic Games, Oct. 10, 2023. Available at: https://store.epicgames.com/pt-BR/news/what-makes-a-aaa-game-a-aaa-game. Accessed on Oct. 24, 2023.

[2] In this sense, see: Best-selling first-person shooter (FPS) videogame series. Guinness World Records, April 21, 2021. Available at: https://www.guinnessworldrecords.com/world-records/87955-best-selling-first-person-shooter-fps-videogame-series. Accessed on October 24, 2023.

[3] In this sense, see: SMITH, B. Adapting ahead of regulation: a principled approach to app stores. Microsoft, 09 Feb. 2022. Available at: https://blogs.microsoft.com/on-the-issues/2022/02/09/open-app-store-principles-activision-blizzard/. Accessed Oct. 24, 2023; GOSWAMI, R.; NOVET, J. Microsoft and Sony sign deal to keep Activision's Call of Duty on PlayStation. CNBC Tech, July 16, 2023. Available at: https://www.cnbc.com/2023/07/16/microsoft-and-sony-sign-deal-to-keep-activisions-call-of-duty-on-playstation.html. Accessed Oct. 24, 2023; DEMPSEY, J. Call of Duty battle over after Sony deal with Microsoft. BBC News, July 16, 2023. Available at: https://www.bbc.com/news/technology-66217632. Accessed on Oct. 24, 2023; AFP. Microsoft and Sony reach agreement on 'Call of Duty'. Exame, July 17, 2023. Available at: https://exame.com/tecnologia/microsoft-e-sony-chegam-a-acordo-sobre-call-of-duty/. Accessed on Oct. 24, 2023.

[4] SPENCER, P. We are pleased to announce that Microsoft and @PlayStation have signed a binding agreement to keep Call of Duty on PlayStation following the acquisition of Activision Blizzard. We look forward to a future where players globally have more choice to play their favorite games. July 16, 2023. X (Twitter): @XboxP3. Disponível em: https://twitter.com/XboxP3/status/1680578783718383616. Accessed Oct. 24, 2023.

[5] In this sense, see: Mergers: Commission clears acquisition of Activision Blizzard by Microsoft, subject to conditions. European Commission, May 15, 2023. Available at: https://ec.europa.eu/commission/presscorner/detail/%20en/ip_23_2705. Accessed on Oct. 24, 2023; KHARPAL, A. EU approves Microsoft's $69 billion acquisition of Activision Blizzard, clearing huge hurdle. CNBC Tech, May 15, 2023. Available at: https://www.cnbc.com/2023/05/15/microsoft-activision-deal-eu-approves-takeover-of-call-of-duty-maker.html. Accessed Oct. 24, 2023; CHEE, F. Y. Microsoft wins EU antitrust approval for Activision deal vetoed by UK. Reuters, May 16, 2023. Available at: https://www.reuters.com/markets/deals/eu-antitrust-regulators-clear-69-bln-microsoft-activision-deal-2023-05-15/. Accessed on Oct. 24, 2023.

[6] EUROPEAN COMMISSION. Case M.10646 - Microsoft / Activision Blizzard. Merger Procedure. Commission Decision of 15.5.2023 declaring a concentration to be compatible with the internal market and the EEA agreement. Disponível em: https://ec.europa.eu/competition/mergers/cases1/202330/M_10646_9311516_7443_3.pdf. Accessed on 24 Oct. 2023.

[7] In this sense, see: Microsoft and NVIDIA announce expansive new gaming deal. Microsoft, Feb. 21, 2023. Available at: https://news.microsoft.com/2023/02/21/microsoft-and-nvidia-announce-expansive-new-gaming-deal/. Accessed on Oct. 24, 2023; HARRINGTON, G. Microsoft enters 10-year agreement with Nvidia and Nintendo in fight to save Activision deal. CNN Business, Feb. 21, 2023. Available at: https://edition.cnn.com/2023/02/21/tech/microsoft-nvidia-nintendo-activision/index.html. Accessed Oct. 24, 2023; KHARPAL, A.; NOVET, J. Nvidia supports Microsoft, Activion merger after Xbox deal to add games to cloud service. CNBC Tech, Feb. 21, 2023. Available at: https://www.cnbc.com/2023/02/21/microsoft-will-bring-xbox-games-to-nvidias-cloud-gaming-service.html. Accessed Oct. 24, 2023.

[8] COMPETITION AND MARKETS AUTHORITY. Anticipated acquisition by Microsoft of Activision Blizzard, Inc. Final Report. 26 Apr. 2023. Available at: https://assets.publishing.service.gov.uk/media/644939aa529eda000c3b0525/Microsoft_Activision_Final_Report_.pdf. Accessed 24 Oct. 2023; ZIADY, H. UK blocks Microsoft takeover of Activision Blizzard. CNN Business, 26 Apr. 2023. Available at: https://edition.cnn.com/2023/04/26/tech/microsoft-activision-blizzard/index.html. Accessed on Oct. 24, 2023.

[9] COMPETITION APPEAL TRIBUNAL. Microsoft Corporation v Competition and Markets Authority. Case No: 1590/4/12/23. Available at: https://www.catribunal.org.uk/cases/159041223-microsoft-corporation. Accessed on October 24, 2023.

[10] COMPETITION AND MARKETS AUTHORITY. Microsoft / Activision Blizzard (ex-cloud streaming rights) merger inquiry. Available at https://www.gov.uk/cma-cases/microsoft-slash-activision-blizzard-ex-cloud-streaming-rights-merger-. Accessed on October 24, 2023.

[11] In this sense, see: DMITRACOVA, O. Microsoft gives ground on streaming in bid to remove UK block on Activision deal. CNN Business, Aug. 22, 2023. Available at: https://edition.cnn.com/2023/08/22/tech/microsoft-activision-new-proposal-uk-regulator/index.html. Accessed on Oct. 24, 2023.

[12] Microsoft concession a gamechanger that will promote competition. Competition and Markets Authority Press Release. 13 Oct. 2023. Available at: https://www.gov.uk/government/news/microsoft-concession-a-gamechanger-that-will-promote-competition. Accessed on 24 Oct. 2023.

[13] In this sense, see: TOH, M.; FUNG; B. Mirosoft completes blockbuster Activision Blizzard takeover after UK removes final hurdle. CNN Business, London, October 13, 2023. Available at: https://edition.cnn.com/2023/10/13/tech/microsoft-activision-blizzard-takeover-uk-intl-hnk/index.html. Accessed Oct. 24, 2023; SATARIANO, A. Microsoft Finally Closes In on Activision Deal After Key Approval. The New York Times, London, 13 Oct. 2023. Available at: https://www.nytimes.com/2023/10/13/technology/microsoft-activision-cma.html. Accessed Oct. 24, 2023; KHARPAL, A. Microsoft's $69 billion Activision Blizzard takeover approved by UK, clearing way for deal to close. CNBC Tech, 13 Oct. 2023. Available at: https://www.cnbc.com/2023/10/13/microsoft-activision-blizzard-takeover-approved-by-uk-regulator-cma.html. Accessed on 24 Oct. 2023.

[14] FTC Seeks to Block Microsoft Corp.'s Acquisition of Activision Blizzard, Inc. Federal Trade Commission Release, 08 Dec. 2023. Available at: https://www.ftc.gov/news-events/news/press-releases/2022/12/ftc-seeks-block-microsoft-corps-acquisition-activision-blizzard-inc. Accessed Oct. 24, 2023.

[15] UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA. Case 23-cv-02880-JSC - Federal Trade Commission v. Microsoft Corp. et al. Available at: https://www.cand.uscourts.gov/ftc-v-microsoft_corp_et_al/. Accessed Oct. 24, 2023.

[16] U.S. appeals court refuses FTC request to pause Microsoft deal for Activision. Reuters, July 15, 2023. Available at: https://www.reuters.com/legal/us-appeals-court-refuses-ftc-request-pause-microsoft-deal-activision-2023-07-14/. Accessed Oct. 24, 2023.

[17] Concentration Act no. 08700.003361/2022-46. Applicants: Microsoft Corporation and Activision Blizzard, Inc. Approved without restrictions on October 6, 2023.

[18] See § 352 of Opinion no. 23/2022/CGAA3/SGA1/SG/CADE (SEI no. 1131445).