European Commission Explains Why It Disagreed With UK CMA Over Xbox's ActiBlizz Deal
Image: Microsoft, Pixabay

Microsoft has officially appealed against the block of its Activision Blizzard takeover in the UK, with the formal process taking place earlier this week. The appeal is being handled by the Competition Appeal Tribunal (CAT).

This was announced by a Microsoft spokesperson in response to Reuters yesterday:

"We can confirm we have filed our appeal."

The UK Competition and Markets Authority blocked the deal in April, claiming that Microsoft "failed to effectively address the concerns in the cloud gaming sector", although the European Commission ended up approving it a few weeks later.

And in a recent speech by European Commission EVP Margrethe Vestager, it was explained in depth why the Commission ended up disagreeing with the CMA about whether to approve the acquisition or not.

Vestager began her speech by stating that she felt the merger — with appropriate remedies - would represent a "positive development" for the industry, while also acknowledging that the deal required a "thorough investigation".

"An important finding was that the overall market share for Microsoft and Activision was generally low in Europe. It's only when you look at specific segments like ‘shooter games' that you get to above 20%. And for consoles, Sony sells about 4 times more PlayStations than Microsoft sells Xboxes.

With this context, we did not think the merger raised a vertical issue. I am told Call of Duty is a very popular shooter franchise. But we found that Microsoft would probably not shoot itself in the foot by stopping sales of Call of Duty games to the much larger PlayStation player base. Our colleagues at the CMA agreed with us and ultimately reached the same conclusion."

As you can see, the European Commission and UK CMA were aligned in many of these views, but the part where they disagreed was in the aforementioned cloud gaming sector, where the EU decided Microsoft's remedies were sufficient:

"Where we did have concerns was in cloud gaming - still a nascent market but one we expect to grow, because it offers many advantages for gamers..."

"We were worried that Microsoft would make Activision games exclusive to its own cloud gaming service. This would have restrained access to games and strengthened Windows' position as an operating system."

"Where we diverged with the CMA was on remedies. We accepted a 10-year free license to consumers to allow them to stream all Activision games for which they have a license via any cloud service. And why did we do this instead of blocking the merger? Well, to us, this solution fully addressed our concerns. And on top of that, it had significant procompetitive effects."

Vestager went on to explain that this remedy "opens the door" for smaller cloud-based services to offer major Activision Blizzard games in the future, ultimately "widening choice for gamers".

Finally, despite the disagreements, it was mentioned that the European Commission enjoyed "excellent" cooperation with the UK, as well as Canada, the U.S. and New Zealand, in coming to a final decision on the Activision Blizzard deal.

Interesting comments from the European Commission, then, and now we'll need to play the waiting game to see if the UK appeal ends up proving successful or not. We'll obviously let you know when we hear more!

What do you make of the European Commission's remarks here? Tell us down in the comments below.