An Activision Blizzard’s Call of Duty: Modern Warfare video game is inserted into the Microsoft’s Xbox One video game console arranged in Denver, Colorado, on Wednesday, Jan. 19, 2022.
Michael Ciaglo | Bloomberg | Getty Images
The British competition regulator says that Microsoft’s $69 billion acquisition of gaming giant Activision Blizzard could harm competition within the U.K. gaming market, and that it could move to dam the deal.
The Competition and Markets Authority published a provisional decision on the deal on Wednesday, stating that the takeover raises competition concerns and will lead to higher prices, fewer decisions and fewer innovation.
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In a notice of possible remedies sent to each parties, the CMA said it might require Microsoft to:
- sell the business related to its popular Call of Duty franchise
- divest the Activision segment of Activision Blizzard
- divest each Activision and Blizzard
- terminate the deal
Microsoft and Activision Blizzard have until Feb. 22 to reply. The CMA is ready to issue a final decision on April 26. The regulator opened an in-depth probe into the deal on Sept. 1.
The CMA is worried that the Activision deal could strengthen Microsoft’s position within the cloud gaming market, adding Call of Duty and other lucrative titles to its cloud-based Xbox Game Pass platform.
Cloud gaming, which allows gamers to play games over the web on devices aside from a console, remains to be in its infancy and never yet a mass-market technology.
The deal would also boost Microsoft’s console business, the CMA said, adding that Microsoft would find it “commercially useful” to make Activision games exclusive to its Xbox hardware or available on PlayStation “under materially worse conditions.”
This “could substantially reduce the competition between Xbox and PlayStation within the UK, in turn harming UK gamers,” the watchdog noted.
Activision Blizzard shares were down 2% on Wednesday following the CMA announcement. Microsoft shares, meanwhile, were trading 2% higher on the back of an announcement concerning the tech giant’s artificial intelligence advancements.
“We’re committed to offering effective and easily enforceable solutions that address the CMA’s concerns,” said Rima Alaily, Microsoft corporate vice chairman and deputy general counsel, in an emailed statement to CNBC.
Microsoft has made commitments to Sony and Nintendo to proceed releasing its latest Call of Duty games on their respective PlayStation and Switch gaming platforms for 10 years.
An Activision Blizzard spokesperson said the corporate hopes to “help the CMA higher understand our industry to make sure they’ll achieve their stated mandate to advertise an environment where people may be confident they’re getting great decisions and fair deals.”
Activision Blizzard CEO Bobby Kotick also sent an internal memo to employees Wednesday, saying that the corporate was “confident that the law – and the facts – are on our side.”
“On this case, our combined corporations will bring more competition to an already crowded field of world-class gaming competitors, including Sony, Tencent, NetEase, Apple, Amazon, and Facebook,” Kotick added. “We consider this merger gives us additional resources to compete with such giants.”
The Microsoft-Activision deal also faces scrutiny within the U.S. and European Union.
Stateside, the Federal Communications Commission is looking for to dam the acquisition on competition grounds, while the European Commission also has a contest investigation into the transaction. The commission, which is the manager arm of the EU, recently filed a charge sheet often called a press release of objections setting forth its concerns concerning the deal, based on Reuters.
