The Memo: Competition authorities take aim at Microsoft over Activision Blizzard merger

Cait Evans - 20th December 2022

Microsoft has once again caused a storm in the video game industry. Almost one year ago, the company moved to acquire Activision Blizzard for a record breaking $68.7 billion, a deal that would constitute the largest acquisition in gaming history. But it is also a deal that threatens to have multiple consequences for their competitors and consumers alike.

Activision Blizzard is a gaming conglomerate which owns the intellectual property rights to a treasure trove of videogames, including Call of Duty, World of Warcraft, and cult favorites like Crash Bandicoot. Of course, IP rights are crucial to this industry. For one thing, they legally protect original game creations from copycat reproduction (it’s the reason why Super Mario games are only ever produced by Nintendo). But while the global nature of the market means that the IP covering these videogames apply across multiple jurisdictions, most of the relevant legislation in the UK comes from the Copyright, Designs and Patents Act 1988 and the Trade Marks Act 1994. In the world of videogames, these rights commonly translate to copyrights for the gameplay itself, artwork, music, and trademarks for original characters.

The problem for Microsoft is that regulators have expressed concern that the acquisition, specifically in the case of the Call of Duty videogame series, may threaten competition between itself and Sony. The game is extremely lucrative for Sony, and a large portion of its sales go to the PlayStation platform. The fear is that Microsoft would be free to make the game an Xbox exclusive, limiting future releases to its subscription service ‘Game Pass’. Not only could this affect Microsoft’s competitors but also consumers who may not be able to access a whole host of Activision games without an Xbox. Microsoft now faces scrutiny from an array of authorities, including the UK’s Competition and Markets Authority who have launched an investigation into the deal, and the US Federal Trade Commission is preparing to sue Microsoft over the move.

The acquisition is a prime example of the kinds of tensions that arise between competition and IP law. IP rights grant companies exclusive ownership of a product, and this can, and often does, come into conflict with competition laws that aims to limit exclusivity. In the digital age, this conflict is becoming increasingly apparent, with large-scale takeovers within the gaming industry now commonplace. In short, lawyers in these practice areas are sure to be in demand for the foreseeable future.