South Korea’s Fair Trade Commission has cleared Microsoft’s proposed acquisition of Activision Blizzard. The commission found no tangible risk of impeding competition in the local market.
The Korea Fair Trade Commission (KFTC) “unconditionally cleared” the deal, stating no concerns about potential competition restrictions resulting from the exclusivity of Blizzard games.
The KFTC ruled that Microsoft’s acquisition is unlikely to exclude competitors by making Blizzard’s games exclusive. Even if exclusivity were to happen, the KFTC believes there is little concern about excluding competitors due to the relatively low popularity of Activision Blizzard games in South Korea.
Market Share Findings
According to the KFTC, Call of Duty holds a global market share ranging from 6 to 8 percent, but in Korea, it is only between 0 percent and 2 percent. Similarly, the Diablo franchise’s market share globally and in Korea ranges from 0 to 2 percent.
Unlike overseas markets, South Korea has numerous alternative game developers with whom competitors can collaborate, ensuring their ability to compete. Therefore, the impact of the acquisition in Korea is not significant enough to create a foreclosure situation.
Considering the limited popularity of Blizzard games in the local market, even if exclusivity were imposed, the conversion of competitors’ customers into Microsoft’s subscribers would have a negligible impact. Competitors in the console market, with PlayStation leading at 70-80 percent market share, followed by Nintendo with 10-20 percent, and Xbox with 0-10 percent in 2021, face no risk of exclusion.
Beneficial Effects and Cloud Market Considerations
The regulator suggests that the acquisition might enhance competition in the console market by making Microsoft more competitive. Microsoft is estimated to hold a market share of 60-70 percent in the cloud gaming market, with Nvidia holding 30-40 percent.
The KFTC notes that Nvidia’s Bring Your Game business model, employed by Geforce Now, actually increases game sales, creating a mutually beneficial effect. Market characteristics and entry barriers mitigate the risk of damaging competition in the cloud market.
PC games are more popular than console games in the Korean market, giving Nvidia, focusing on PC games in the cloud business, greater scalability than Microsoft.
The release of Lost Ark on Geforce Now resulted in a significant increase in paid subscribers in Korea. However, the cloud gaming market in Korea is still in its early stages, representing only 0.02% of the total game market.
Market shares fluctuate annually, and potential entry by other companies like Sony and Amazon mitigates concerns about competition.
Regulatory Engagements and Global Approvals
The KFTC engaged in video conferences with foreign competition authorities and gathered opinions from stakeholders, including competitors on Microsoft’s acquisition of Activision Blizzard. . While other national regulators may have differing views due to Activision Blizzard’s importance in their regions, the KFTC’s decision aligns with the unique competitive landscape in South Korea.
The acquisition has received approvals from 38 countries, including the European Union and China. The British CMA stands alone in opposing the deal, and a preliminary injunction against Microsoft in the “gamers’ lawsuit” seeking to prevent the acquisition was denied.