'MS's Bold Move'... Why Simultaneous Regulatory Bashing in the UK and US?

[Image source=AP Yonhap News]

[Asia Economy Reporter Yujin Cho] On the morning of January 18 this year, Microsoft (MS) announced to the media and investors the historic merger and acquisition (M&A) between the world's largest software company MS and North America's largest game developer Activision Blizzard. The acquisition price was $68.7 billion (approximately 82 trillion KRW at the exchange rate at the time). This was the largest deal in the industry, with a 45% premium over the previous day's closing price. MS aims to complete the transaction by June next year, but the deal has become uncertain due to regulatory hurdles from major countries. Since this deal took place amid a global wave of antitrust regulations targeting big tech, it is expected that removing regulatory obstacles will not be easy.

◇ The Meeting of the 'Top of the Tops' MS and the 'Unrivaled No.1' Blizzard

Founded in 1975, MS pioneered the personal computer (PC) era with DOS and has dominated the global PC market by expanding into almost every software sector, including the Windows operating system, office programs, web browsers, and cloud services. However, with the advent of smartphones and the paradigm shift to mobile, MS struggled in its core business and expanded into the entertainment sector by launching the 'Xbox' console game in 2001 to secure new growth engines. Although MS was the absolute leader and the 'top of the tops' in the PC era, it remained stuck in 2nd or 3rd place in the entertainment sector, wandering for 20 years.

Activision Blizzard owns blockbuster online games such as 'StarCraft,' 'Warcraft,' and 'Diablo,' as well as the mobile game company King.com, famous for the 'Candy Crush' series. Formed through a merger with Vivendi Games in 2008, the company has established itself as the unrivaled No.1 game developer in North America in terms of market capitalization, revenue, development, and publishing. Currently, about 400 million people worldwide enjoy Activision Blizzard's games monthly across 190 countries.

◇ The Overgrown Big Tech Bashing

The historic deal has been surrounded by simultaneous regulatory barriers in the UK, European Union (EU), and the United States. The UK was the first to initiate action. The UK's Competition and Markets Authority (CMA) completed a preliminary investigation started in July and began an in-depth investigation in September. The investigation is intensifying as MS has not presented sufficient remedies to resolve antitrust concerns at this stage. The EU competition authorities are also conducting an investigation considering the scale of the acquisition, the dominant market positions of both companies, and concerns from competitors including Sony. An EU competition official indicated that "(MS's acquisition of Blizzard) is a large and complex deal requiring extensive investigation," suggesting the investigation period may be prolonged.

The U.S. regulatory authority, the Federal Trade Commission (FTC), has taken a strong stance by filing an antitrust lawsuit opposing MS's acquisition of Activision. On the 8th (local time), the FTC stated, "MS's control over Activision Blizzard's intellectual property (IP) could hinder competition in quality, price, and innovation," adding, "This will ultimately harm consumers," explaining the rationale behind the legal action.

◇ U.S. Launches Full-Scale Offensive to 'Correct Unchecked Power'

The core issue is whether the merger constitutes an abuse of monopoly power in the game distribution market. While MS has enjoyed a monopoly in the PC market, it was a latecomer in the gaming market. MS chose an M&A strategy to rapidly increase its market share in gaming. Through active M&A, it grew in size and competitiveness, and by acquiring the gaming giant Blizzard, it rose to stand alongside China's Tencent and Japan's Sony as a major gaming company. Competitors are wary that MS might abuse its market position by exclusively releasing blockbuster Blizzard games on its subscription service 'Game Pass' and blocking other game companies from platforms like Wii and PlayStation.

The FTC pointed out that when MS acquired ZeniMax Media in the past, it blocked and pressured competitors from accessing games, and it believes MS could similarly manipulate the market using IP this time. Holly Vedova, Director of the FTC's Competition Bureau, directly stated, "(In past cases) MS proved that they would not provide game content to their competitors."

The U.S. regulators' stance is clear. Previously passive in regulating big tech, the U.S. has signaled aggressive legal enforcement since the Biden administration took office, dividing oversight between the Department of Justice and the FTC. The rapid growth of the digital market during the COVID-19 pandemic led to these companies becoming excessively large in a short time. The FTC, led by Lina Khan, known as the 'Grim Reaper of Big Tech,' is widely expected to take ultra-strong measures such as corporate breakup lawsuits and legislation to reduce business scale, as seen in the past with AT&T's corporate breakup case.

This content was produced with the assistance of AI translation services.