In January 2022, Microsoft announced plans to acquire video game giant Activision Blizzard, the maker of popular video games including Call of Duty. Over the course of the year that followed, this proposed acquisition faced scrutiny and challenges from competition regulators in the United States, United Kingdom, and European Union.

Just this week, the European Commission held a hearing to air some of the concerns around this proposed acquisition. This is just the latest example of technology sector mergers or acquisitions facing challenges from competition regulators. But do attempts to block the acquisition accurately reflect the market experience of consumers? And what do these challenges reveal about current antitrust laws?

As with other cases brought against technology companies, one of the key points of contention related to the acquisition is the appropriate market definition that determines who the competitors are or are not. For example, in its case to stop the merger, the Federal Trade Commission (FTC) contends​Microsoft’s acquisition of Activision’s video game library would allow it to leverage that library to limit competition in the video game console market, thereby securing its dominance. Ideally, a market definition should reflect the reality that consumers experience and a case should be able to show harm to consumers from the transaction being allowed. So what does the gaming market look like to the average consumer?

Most regulators look at gaming only in terms of video game console games. For instance, Sony is concerned that following the acquisition, Microsoft might not allow popular games on the PlayStation and their other platforms.

Even under such a definition, the market has to be very narrowly defined not to allow multiple competitive players. Gamers already choose between platforms like Nintendo’s Switch, Sony PlayStation, and Microsoft’s Xbox, based on a variety of factors that include not only the availability of games but other features like computing and graphics quality. Additionally, this a global market where different consoles are preferred in different markets, meaning that a single platform’s dominance may not be as certain as it appears.

But a definition that only looks at console gaming does not reflect the market most consumers and game developers experience. For example, revenue from mobile gaming on devices like smartphones and tablets has surpassed revenue from console gaming, and continues to grow in popularity. (Activision makes popular games in this market, but Microsoft currently has a very small presence.)

But that’s not the only recent change in the gaming market. The growth and increasing affordability of virtual reality devices like the Oculus Quest are likely to bring new formats and types of players to the market. New gaming technologies like mobile and VR (Virtual Reality) continue to disrupt and add competition, which benefits consumers with more choices for entertainment and types of games.

In the United States, analysis of transactions like the Microsoft-Activision acquisition should largely focus on any potential harms to consumer welfare. Given the incredibly dynamic and competitive nature of the market, the FTC and other regulators have to put forth creative theories to try to support their allegations.

For example, the FTC case excludes the Nintendo Switch as a competitor to Microsoft’s Xbox. Microsoft has also attempted to alleviate some of the concerns by promising it would not make the extremely popular Call of Duty games as Xbox exclusives for at least 10 years if the acquisition is approved.

The real problem with this latest challenge is that it is another example of regulators pursuing creative theories and losing sight of the consumers whom antitrust law was designed to protect. If consumers are not the focus, regulators may use powerful antitrust tools to block mergers and acquisitions that competitors do not like or lost out on themselves. The scrutiny of the Microsoft-Activision merger comes at a time when there have been dramatic shifts in the policy around such actions, including the FTC’s revoking its existing vertical merger guidelines and the EU’s Digital Markets Act.

Perhaps more concerning is the fact that even if the US courts reject an overly narrow market definition, European or UK regulators could still stop a transaction that could benefit (or at least would not harm) consumers, based on a theory that focuses on what competitors want instead and once again attacks a successful American technology company.