Ooooh boy, this is a nice one!
Microsoft is trying to acquire Activision Blizzard for $69 billion. Activision is the publisher behind franchises like Call of Duty, Warcraft, and Candy Crush, and Microsoft hopes the company’s blockbuster franchises will help the company boost Xbox Game Pass, along with its fortunes in mobile gaming, where Microsoft is currently is largely absent.
A deal of this size has to overcome several regulatory hurdles before it becomes official. Some of Microsoft’s largest markets, including the UK, the United States and the European Union, have yet to approve the deal, pending various types of scrutiny processes.
The UK’s CMA regulator recently left us scratching our heads over some of his foreign language and arguments regarding the deal. It’s easy to sidestep accusations of bias, but as I wrote earlier, I’m more inclined to describe the CMA as incompetent. Indeed, the UK establishment has been notorious for its tech illiteracy in the past, having previously asked Microsoft “when are you going to ban algorithms?” In an effort to be a little more savvy about gaming, an EU representative recently tweeted his stance that he wanted to keep Call of Duty “on his PlayStation,” sparking allegations of bias on one side, while others claimed that furore came down to a storm in a 16-bit teacup.
However, I would argue that it is much more than a storm in a tea cup mentioned above. Considering that this particular representative held a position within the EU’s antitrust departments for nearly two decades.
Is Microsoft getting a fair hearing on this issue? Or will the decades-long negativity surrounding the brand have a chilling effect on the final decision?
What did the EU say about the merger between Activision and Blizzard and Microsoft?
The drama started when Ricardo Cardoso, Deputy Head of the Inter-Institutional & Outreach Unit in the European Union, sent out a tweet in which he read quite blatantly that he favored Sony in the regulatory battleground.
“The Commission is working to ensure that you can still play Call of Duty on other consoles (including my Playstation).” Cardoso wrote before making a relatable joke about government agencies having horrible stock photos. After writers like myself, Tom Warren of The Verge, and Ryan McCaffrey of IGN questioned his choice of words and apparent perception of bias, Cardoso clarified: “I am not involved in the review of the merger and do not even work in the mergers department. As my profile clearly shows, my comments are personal and not a position of the Commission, whose decision will be made on the basis of the facts and the law.” However, this was far from the end of the drama.
It didn’t take long for the internet to discover that Cardoso was in fact part of the regulatory “community” for 17 years before only recently taking up his current position.
“Personal News”: Excited to join @JornaKerstin’s team as Deputy Head of Unit for Inter-Institutional Relations and Outreach in @EU_Growth. I will miss the @EU_Competition community, 17 years went by in a flash, but looking forward to the new challenge! Discover the differences? pic.twitter.com/wFIkmyXyEAJune 16, 2022
In response to the drama, EU spokeswoman Adriana Podesta dropped a statement from Tweaktown, promising that Cardoso will not be involved in the review of the merger between Activision, Blizzard and Microsoft.
“As you rightly pointed out, Mr Cardoso works in the Director General for the Internal Market and not the Directorate General for Competition. Mr Cardoso is not involved in the review of this transaction. Furthermore, as clearly stated in his Twitter profile, he tweets in a personal capacity.”
So what, no problem right? I mean, after all, he wrote “views = mine” in his Twitter profile, which completely confirms beyond any doubt that his stance on this deal will in no way influence and advise his old friends in the regulatory “community”. Turn right?
Is it REALLY a big deal?
I’m sorry, but if you’re involved deep in a government agency you can’t just write “views=personal” in your biography on Twitter and abdicate all responsibility. The EU is already a deeply mistrusted institution in much of Europe, and like it or not, if you’re representing something like competition regulation, even in a tangential capacity, it would at least be prudent to be careful how you project your opinion on social media.
To me, this points to a more pervasive problem that Microsoft has been trying to undo since the late 90s. Among a certain age group, Microsoft is seen as a bully, as an aggressor and sincere restrictive of competition. In the 1990s, Microsoft was embroiled in a notorious antitrust case over its Internet Explorer web browser, one of the first major Internet-related legislative ramifications during the dotcom boom. Microsoft vs. the United States it was called, and the pretty public affair sparked a cloud of negative perception that continues to this day, at least on a tidal wave level.
And honestly: good.
Microsoft and Xbox fans may not want to hear this, but the big Redmond giant enjoys a privileged position as one of the world’s first $1 trillion companies. Few companies have produced more millionaires than Microsoft, due to their near-total monopoly on desktop computers, both home and office, and dominant positions in the cloud, business software and beyond. Microsoft should be scrutinized because while the company has largely cleaned up its act in my opinion, it wouldn’t be hard for them to slip back into greedy, anti-consumer practices if we, as onlookers, kept our eye of the ball off.
No one serious is saying this deal shouldn’t be scrutinized. And I would go on to say that nobody seriously wants Call of Duty taken away from PlayStation. Seriously, nobody wants Call of Duty to be downgraded on PlayStation in any way, nor do they want PlayStation gamers to miss out – except for the most hardcore fanboys. The benefit of this deal for gamers is that we get Call of Duty in Xbox Game Pass for $10 per month instead of $70 per game. I’d advocate that Microsoft bring that deal to PlayStation Plus as well so that all gamers can benefit no matter where they are or what they want to play on.
Microsoft is in a privileged position to be able to make this acquisition in the first place, and if they are allowed to go ahead with it, it must be with a view to it benefiting gamers – all gamers. But that’s not what PlayStation wants here.
I’ve previously written about how Sony knows it won’t lose Call of Duty to PlayStation, but the fact that Call of Duty is moving to a rival platform reduces their bargaining power on several counts. Things like Sony’s cross-play tax that it charges publishers who dare to connect PlayStation gamers with Xbox gamers. Sony’s anti-Xbox Game Pass clauses that force developers wanting to publish on PlayStation to reject Xbox Game Pass deals, etc. How do these things create competition and benefit consumers?
It is with these things in mind that the position of regulators remains baffling. Cardoso may not be directly involved in the merger, but the fact that he’s been within that “community” for 17 years (his words) likely gives him some leverage over individuals who may not understand the situation as well as we do. heap.
The gaming industry is not like other industries. We’ve seen a $5 indie game called Vampire Survivors pop up out of nowhere on a $1500 budget and dominate headlines and social media without an ounce of marketing, sharing a stage with games worth hundreds of millions of dollars. This just wouldn’t happen in other creative industries, and it often feels like regulators don’t fully understand how competitive, vibrant and healthy competition is in the gaming industry as compared to others.
It is through this cloud of ignorance that it is worth asking the question: could a few savvy “gamers” within the EU influence the regulatory hearings to achieve their own desired outcomes? Keeping Call of Duty on “my PlayStation” indeed.
Is Microsoft getting a fair hearing?
No one is seriously suggesting that this deal should not be scrutinized, especially in Europe. Activision-Blizzard employs literally thousands of people, a large percentage of them in Europe. Microsoft is notorious for its small customer support footprint. Honestly, I’m concerned about things like, what might happen to the quality of Warcraft support over time? Will Activision-Blizzard employees find it easier to join a union? Will I ever get a new Starcraft *cough*? And so on. But as for competition? The idea that Call of Duty owner Microsoft will somehow cut back or foreclose on PlayStation is a joke at best and Sony talking point at worst.
Regulators are supposed to promote and develop competition, not suppress it. Microsoft is a big company, but its presence in gaming – especially in Europe – puts it quite behind its competitors. The idea that Nintendo isn’t competing in the same space, according to the UK’s CMA, is also a joke. The audience overlap is obvious to anyone with a brain, and Nintendo is able to maintain a dominant position without a single call of duty bullet or boot.
But I digress. The fact is, by revealing his personal feelings on Twitter, Cardoso is very gently reminding us that regulators are people too, and hey, that’s okay. What is not okay is misusing a government position to influence favorable outcomes you personally, when the role is to protect consumers – not businesses, and not shareholders. And hey, if nothing else, it looks mighty bad.