With the acquisition of Microsoft Activision Blizzard, one of the game industry’s top three businesses will join forces with one of the industry’s leading game studios. Will the Activision Blizzard deal, as part of Xbox’s larger acquisition strategy, violate antitrust laws? At this time, a legal expert believes it is unlikely.
Remember how Xbox was able to acquire Bethesda without coming afoul of antitrust regulations? This is because it was a sort of vertical integration in which a content distributor, such as Xbox, bought a content provider, such as Bethesda.
Xbox’s acquisition of Activision, according to David Hoppe, a Managing Partner at the San Francisco-based Media and Tech legal firm Gamma Law, follows the same concept.
“The acquisition is another example of so-called ‘vertical integration’ in the video game industry — a console manufacturer (distributor) acquiring a game developer (producer). Of course, this is the largest such deal in games industry history, but U.S. courts have historically been unwilling to apply restrictive antitrust principles to vertical transactions,” Hoppe says.
Indeed, the Justice Department has never had a problem with platform exclusivities, which is what the Xbox-Activision pact is expected to bring about. Given that Xbox is also a game maker, the merger might be considered as a “horizontal” acquisition, in which two direct competitors are united. “When the ‘products’ are creative works like video games, each of which is arguably unique and so not in direct competition,” Hoppe adds, “it is difficult to apply legal competition concepts.”
While Hoppe acknowledges that “it would be quite ridiculous at this point to try to make an antitrust case on the basis that the acquisition will result in less consumer choice in the shooter games product category, for example,” he believes that “it would be quite ridiculous to try to make an antitrust case on the basis that the acquisition will result in less consumer choice in the shooter games product category.”
One of the arguments Activision provided when discussing the strategic benefits of Xbox acquiring Activision, which includes mobile developer King, was Xbox’s lack of presence in the mobile games industry.
Despite the legal path for such a deal to go through, Hoppe believes that consolidation of this magnitude is bad for the industry and that the clear winners at this time are “likely to be Activision executives, who benefit from a major diversion of attention from a huge, potentially existential crisis, and undoubtedly have the assurance of rich exit packages at the appropriate time.”
By June 2023, the Xbox Activision Blizzard acquisition will be complete. As the deadline approaches, numerous agencies will announce whether they will pave the way for such a deal to go forward.