Competition Law
Competition law – is the law of preventing anticompetitive conduct by businesses in a market (for the US equivalent see Antitrust Law). The European Union and the UK are particularly influential in competition law, with their respective competition authorities (the European Commission (EC) and the UK Competitions and Markets Authority (CMA)) regularly launching high-profile competition investigations. Anticompetitive conduct can be categorized into two main categories. The first is horizontal, or potentially collusive conduct, i.e., companies working together to cause negative market effects such as in mergers, cartels or joint ventures (this usually falls under Art. 101 TFEU[1]). The second is vertical, or potentially exclusionary conduct, i.e., companies working against each other to cause negative market effects such as in monopolizations and vertical contracts such as exclusive dealing, tying contracts or refusals to deal (this usually falls under Art. 102 TFEU). In some cases, hybrid conduct can have both collusive and exclusionary elements.
In the EU, competition law is regulated in Art. 101-109 TFEU as well as Regulations and Directives specific to certain sectors or types of conduct, such as the recent Digital Markets Act.[2] Competition law can be enforced both privately as well as by the EC or Member State actors in national and European courts. If a behavior is deemed anticompetitive by a court, remedies can include damages, fines and penalties, divestiture of assets, entities or rights to intangible assets, and provisions for conduct such as non-discrimination provisions or mandatory licensing provisions.[3] Additionally, any agreement or decision in breach of Art. 101 TFEU is considered null and void.
For video game companies, competition law is particularly relevant during M&A deals (see M&A). EU competition law applies when a merger or acquisition has a community dimension, affecting multiple Member States, and might significantly impede effective competition. It is governed by Merger Regulation (EC) No. 139/2004. A notorious recent example of competition law’s relevance in M&A deals is the EC’s and CMA’s investigation into the historic US$69B Microsoft-Activision Blizzard merger. Both competition authorities had concerns about the anticompetitive effect of the merger, as Microsoft might seek to prevent distribution of Activision Blizzard games to other consoles, subscription and cloud gaming services and its position in the PC operating system market would be strengthened.[4] To address the potential harm for competition in cloud game streaming services and the PC operating system market, Microsoft made a ten-year commitment to grant free licenses to consumers in the European Economic Area, enabling them to play Activision Blizzard games they had bought digitally on any cloud game streaming service. Following this commitment, the EC approved the merger on May 15, 2023.[5] The CMA had similar concerns regarding cloud gaming, but decided to block the deal on April 26, 2023. Following this, Microsoft struck an agreement with Ubisoft, granting it cloud streaming rights to all Activision games outside of the EEA. The CMA approved this amendment on October 13, 2023;[6] on the same day, Microsoft and Activision Blizzard closed their deal.
[1] Consolidated version of the Treaty on the Functioning of the European Union [2012] OJ C 326/47.
[2] Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act) [2022] OJ L 265/1.
[3] Council Regulation (EC) No 1/2003 of 16 December 2002 on the Implementation of the Rules on Competition Laid Down in Articles 81 and 82 of the Treaty [2003] OJ L 1/1, Art. 5, 9, 23, 24.
[4] EC, ‘Mergers: Commission opens in-depth investigation into the proposed acquisition of Activision Blizzard by Microsoft (Press Release)’ (EC Website, 8 November 2022) <https://ec.europa.eu/commission/presscorner/detail/en/ip_22_6578> accessed 8 March 2024; CMA, Anticipated Acquisition by Microsoft Corporation of Activision Blizzard, Inc., Issues Statement, 14 October 2022.
[5] EC, Commission Decision declaring a concentration to be compatible with the internal market and the EEA agreement (Case M.10646 – MICROSOFT / ACTIVISION BLIZZARD), C(2023) 3199 final, 15 May 2023.
[6] CMA, Anticipated acquisition by Microsoft Corporation of Activision Blizzard (excluding Activision Blizzard’s non-EEA cloud streaming rights), Decision on Consent under the Final Order, 13 October 2023.
