What happened
Technically speaking, Microsoft (MSFT 1.82%) had a positive Tuesday on the stock exchange. However, its share price only crawled 0.4% higher, lagging the nearly 0.6% rise of the S&P 500 index. The reason for the investor hesitation was a potential regulatory headache for the tech industry giant.
So what
The European Commission (EC), the executive arm of the 27-nation European Union, said in a statement that morning it has opened an in-depth investigation of Microsoft's deal to buy top video game company Activision Blizzard (ATVI).
The EC's preliminary investigation found that a potential Microsoft/Activision tie-up could "significantly reduce" competition for video games. This market includes multi-game subscription services, cloud game streaming services, and even the PC operating systems that Microsoft has built its business upon.
Echoing criticism from other opponents of the deal, the Commission is particularly concerned that Microsoft -- developer of the Xbox game console -- might limit or entirely deny access to Activision Blizzard titles to rival systems. "Such foreclosure strategies could reduce competition in the markets for the distribution of console and PC video games, leading to higher prices, lower quality, and less innovation for console game distributors, which may in turn be passed on to consumers," the EC added.
Now what
Microsoft shook up the video gaming world when it announced the deal in January. The transaction, which is to be effected entirely in cash, is valued at just under $69 billion, making this a high-stakes acquisition.
Meanwhile, Microsoft has been under the regulatory microscope numerous times and for numerous situations before; it has experience negotiating with regulators. In the most probable scenario, it'll grant a few concessions to win the EC's approval, but no one should assume this roadblock will completely stop the deal from happening.
