The Microsoft Activision Blizzard acquisition will bring together one of the game industry’s big-three companies, with one of the industry’s leading game developers. As Xbox continues its strategy of major acquisitions, will the Activision Blizzard purchase run afoul of antitrust laws? A legal expert says not likely at this stage.
Remember how Xbox successfully acquired Bethesda without running into complications with antitrust laws? This is because it was a form of vertical integration where a distributor of content, like Xbox, purchased a content producer, like Bethesda.
David Hoppe, a Managing Partner at the San Francisco-based Media and Tech law firm Gamma Law says Xbox’s acquisition of Activision runs on the same principle.
“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 historically the Justice Department has not had issues with console exclusivities, which is a likely outcome of the Xbox-Activision deal.
While there is a chance the deal could be viewed as a “horizontal” acquisition — where two direct competitors are merged — given that Xbox is also a game developer. Hoppe says, “it is difficult to apply legal competition principles when the ‘products’ are creative works like video games, each one of which is arguably unique and therefore not in direct competition.”
While convergence in the industry means all entertainment options compete with each other in some way, Hoppe explains 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.”
In fact, Xbox’s lack of presence in the mobile games space is one of the reasons Activision offered when it discussed the strategic benefits of Xbox acquiring Activision, which includes mobile developer King.
Despite the legal pathway for such a deal to go through, Hoppe does say consolidation at this scale could be bad for the industry and that at this time the clear winners 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.”
The Xbox Activision Blizzard acquisition is set to finalize by June 2023. As we head towards this date, various agencies will announce whether they’ll clear the way for such a deal to proceed. Until then check out IGN’s full coverage of events so far, including reactions across the games industry, Activision CEO Bobby Kotick’s reasonings for the sale, and how this sets the stage for a new kind of content war.
Matt T.M. Kim is IGN’s News Editor. You can reach him @lawoftd.