CADE clears Microsoft's acquisition of Activision Blizzard

This past Wednesday (5 October), the Office of the Superintendent General, the investigative arm of the Administrative Council for Economic Defense (CADE), cleared Microsoft's full acquisition of Activision Blizzard. Although unconditionally approved in Brazil, the merger is still contingent on the clearance of foreign authorities from the US and the EU, amongst others.

In Brazil, the transaction involves horizontal overlaps between the merging parties' activities of development, publishing, and distribution of video games and related services. The deal includes the markets of game development and publishing, game distribution, online advertising, and merchandising.

Moreover, the acquisition creates or strengthens vertical integrations and complimentary relationships between the industries of game publishing and distribution, game publishing and consoles, and game publishing and online advertising. The antitrust authority ran several scenarios to analyse the relevant markets that could be affected in the product and geographic dimensions.

The analyses showed the horizontal overlaps in the markets of game publication, game distribution, online advertising, and merchandising raised competition concerns in none of the scenarios analysed. The data revealed there was no relationship between the deal and a potential exercise of market power, according to the parameters of CADE Resolution 33/2022.

Regarding the possible vertical effects, the Office of the Superintendent General examined whether the deal would give Microsoft the power or incentives to foreclose any of the vertically related or complimentary markets.

As to a potential market foreclosure in the game publishing segment, although Microsoft holds a significant share in the markets of video game consoles and digital distribution, CADE did not find Microsoft had incentives to prevent Activision Blizzard's rival publishers from accessing its platforms since that would imply a reduction in the quantity and diversity of the Xbox game catalogue, making Microsoft's products and services less attractive to customers.

Regarding a possible market foreclosure in the downstream market, the analysis of the investigative body showed that, despite the relevance and popularity of Activision Blizzard's games, even if its catalogue were exclusive to the Microsoft environment, this would not substantially decrease competition in the markets—even if it meant a competitive advantage to Microsoft.

Thus, although some users of the Sony PlayStation console could switch to Xbox in the hypothesis of Activision Blizzard's games being exclusive to Microsoft (especially Call of Duty) the authority did not find evidence that this alone could translate into a competitive risk for the console market as a whole.

Lastly, as to the complementarity between Microsoft's and Activision Blizzard's activities in the markets of game publishing (particularly in the segment of mobile games) and online advertising, CADE observed the parties' shares in these markets are below the minimum percentage for a foreclosure in all possible scenarios, as per the authority's Resolution 33/2022.

Thus, the opinion of the Office of the Superintendent General was in favour of clearing the merger unconditionally.

Access Case no. 08700.003361/2022-46.