Microsoft-Activision deal: UK clearance remains the last hurdle

This is a fast-moving story which is liable to develop daily. This article is up-do-date as of the date of its publication.

Merger control is only very occasionally relevant to the ownership of sporting bodies and clubs. Sports prohibit the multiple ownership of clubs or teams to safeguard the integrity of competition. There are otherwise limited restrictions on who can own a sporting organisation. A prominent if distant example of UK merger control intervening in a big sports acquisition is the decision of the UK’s Department for Trade and Industry to block BSkyB’s £623 million bid to purchase Manchester United in 1999. This followed a report from the UK’s Monopolies and Mergers commission, since superseded by the Competition and Markets Authority (“CMA”), which suggested the transaction would negatively impact competition between broadcasters on the UK market for media rights and the balance of sporting competition within the Premier League itself[1]. A more current example is the proposed new venture between the PGA Golf, LIV Golf and the European Tour, which will attract the attention of competition authorities around the world.[2]

As is invariably the case, comparisons between traditional and esports must be treated with care in this context and account for the differing dynamics between the two industries. Traditional sport is a form of entertainment where the spectacle provided by elite competition is the main product. As against this, the overwhelming focus of the video games industry is on personal participation. The development of esports competitions before a public audience is a relatively recent and niche addition. The proposed c. $70 billion purchase by Microsoft of Activision Blizzard (“Activision”) was seen as a potential shot in the arm for esports at a time when funding and advertising revenue have contracted[3] and investors’ hopes for significant growth and mainstream adoption have, thus far at least, been disappointed.[4]

Activision is the developer of the hugely successful Call of Duty franchise among other prominent titles such as World of Warcraft, Overwatch and Diablo. Call of Duty has sold over 400m units and is a prominent esports game, with Activision running a professional Call of Duty league. However in a recent filing to the US Securities and Exchange Commission Activision stated that its professional leagues:[5] “continue to face headwinds which are negatively impacting the operations and, potentially, the longevity of the leagues under the current business model.” There is hope within esports that the financial and reputational support Microsoft can inject into an important player like Activision might help to revive the industry.[6] These hopes were initially dashed by the CMA’s decision to block the merger and the continued opposition of the US Federal Trade Commission (“FTC”), albeit for reasons unrelated to any secondary effects the deal might have for esports. The rest of this article will describe the current state of play with Microsoft’s efforts to obtain regulatory approval.

Article content:

1. UK clearance remains the last remaining obstacle to the Microsoft – Activision deal
2. Current state of play
3. Application Before The Competition Appeal Tribunal
4. Comment