The Microsoft logo on a cell phone, in the foreground, on an illustration of Activision video game characters. Dado Ruvic (Portal)
Microsoft announced this Friday the completion of its acquisition of Activision Blizzard for $69 billion, after a nearly two-year battle with regulators in the United States, the United Kingdom and the European Union threatened to derail the deal. The deal, the largest in the consumer technology sector since AOL’s acquisition of Time Warner more than two decades ago, signals that despite American antitrust politics, the industry’s giants still have the freedom to use their cash reserves to grow even bigger.
The largest acquisition in the history of the video game industry gives the technology company a dominant position over its competitors, moving from fifth to third place worldwide in the industry, behind Tencent Holdings and Sony Group. The deal marks a stunning turnaround after Microsoft executives underestimated the extent of antitrust objections, which were particularly severe in both the United States and the United Kingdom, forcing the software giant to give Activision a three-month extension to the agreement’s expiration date ask. Brussels agreed to the purchase in May subject to conditions.
The software maker was able to cease operations after making changes to its merger agreement to convince British authorities. The US Federal Trade Commission (FTC), which failed in an attempt to block the operation in court, is continuing its legal action in its own administrative body. This could force the two companies to back out of the deal if the FTC is successful.
Britain’s Competition and Markets Authority said on Friday it had approved the deal after adopting a restructuring plan that included selling some gaming rights to French publisher Ubisoft Entertainment. The UK regulator was concerned about maintaining free competition in the emerging market for streaming games over the cloud while configuring and generalizing the metaverse.
Activision’s titles include the ever-popular Candy Crush and its spin-offs. However, the nearly two-year delay means Microsoft has fallen further behind in this area amid a decline in an oversaturated sector. The company continues to dispute with Apple over access to its App Store. In 2020, Microsoft President Brad Smith criticized Apple’s terms, including a 30 percent cut in developer revenue and restrictions on cloud gaming. Apple’s app remains inhospitable to Microsoft’s cloud gaming service, which iOS users must access via a mobile browser.
The closure represents a victory for technology companies and potentially a precedent given the colossal efforts by governments around the world to take action against companies such as Microsoft, Google, Apple, Amazon and Meta, the owner of Facebook. Regulatory restrictions have multiplied in recent years. The FTC tried to stop Meta from buying a startup that makes a virtual reality fitness game. Last year, the U.S. Justice Department filed a lawsuit to block the purchase of a health technology company to prevent the acquisition from providing one of the country’s largest insurers with data about its competitors. Digital commerce giant Amazon is piling up lawsuits for unfair competition and gobbling up its smaller competitors. The latest lawsuit alleging price increases and interference with competition was filed last month.
claim of the state treasury
Microsoft will appeal a decision by the US Internal Revenue Service (IRS) that the software maker owes at least $28.9 billion in taxes allegedly due to its particular way of recording revenue and expenses of its worldwide subsidiaries from 2004 to 2013 The company announced Wednesday after Wall Street closed that it disagreed with the “proposed adjustment notices” on its federal tax returns and would appeal the decision.
The dispute centers on a 2012 IRS audit of transfer pricing, a method companies use to shift profits to tax havens and avoid the U.S. corporate tax rate. At the time, Microsoft had shifted billions of dollars in benefits to other jurisdictions such as Puerto Rico, a U.S. territory that applies a much lower corporate tax rate.
The company has changed its corporate structure and practices since the years covered by the audit, so the issues raised by the IRS are not relevant to the way it records revenue today, Daniel Goff, a vice president at Microsoft, said in a blog post .
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