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Microsoft/Activision Blizzard Merger Raises Cloud Gaming Concerns for New Zealand Regulator

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Microsoft Activision-Blizzard FTC

Today, following a series of delays, the New Zealand regulator (simply called the Commerce Commission) published a Statement of Issues on the Microsoft/Activision Blizzard merger.  The Commerce Commission expressed concerns regarding the potential negative effects on competition in the cloud gaming market.

We are concerned that these effects may arise as a result of the merged entity either partially or fully foreclosing its rivals in cloud gaming, such as Sony or NVIDIA, from accessing certain Activision content, and in particular the game Call of Duty (CoD), to the detriment of competition in cloud gaming.

The New Zealand regulator is also still considering potential problems for the console gaming market following Microsoft's $68.7 billion acquisition.

We are also continuing to consider whether the Proposed Transaction would substantially lessen competition due to the merged entity either partially or fully foreclosing its rivals in gaming consoles, in particular Sony, from accessing certain Activision content, to the detriment of competition in the supply of video game consoles. 

If Activision’s game titles are sufficiently important to driving sales of cloud gaming services or video game consoles, then this could result in the merged entity having both incentive and ability to foreclose rivals’ access to this content, weakening their ability to compete.

To clarify, the Commerce Commission hasn't finalized its decision yet. In the Statement of Issues, the regulator requested submissions and evidence from Microsoft, Activision, and other interested parties. These will have to be submitted by July 4th, while the final verdict will be rendered by July 17th, following a time extension that the Commerce Commission stipulated with Microsoft.

As a reminder, the massive merger has been cleared in over 40 countries, including the whole European Economic Area, China, Japan, South Korea, Brazil, Chile, Serbia, and South Africa. Microsoft and Activision are, however, facing opposition in two key markets: the United States and the United Kingdom. In the latter, the Competition and Markets Authority (CMA) officially blocked the deal, forcing Microsoft and Activision to go to the Competition Appeal Tribunal (CAT), which is expected to rule before the end of July.

In the United States, the FTC had already sued to block through its internal system. However, following the aforementioned clearances and the rumors that Microsoft could potentially 'close over' CMA's block through a workaround, the FTC has now gone to a federal court and requested a preliminary injunction to prevent closure. The case will be discussed between this week and the next.

Written by Alessio Palumbo

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