The government agency in charge of regulating mergers and acquisitions in the UK said Wednesday that it sees a number of serious problems with Microsoft’s proposed $69B USD acquisition of Call of Duty and World of Warcraft maker Activision Blizzard. In a preliminary conclusion published by the Competition and Markets Authority (CMA), the agency noted that Microsoft’s purchase of Activision Blizzard could potentially result in higher prices, less options, and less innovation for UK consumers.
Based on evidence the agency reviewed along with consultation from Microsoft, Activision Blizzard, Sony, and other stakeholders in the UK, it concluded that “Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service (or only available on other services under materially worse conditions),” adding that it “already accounts for an estimated 60-70% of global cloud gaming services and also has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).”
The CMA also believes the acquisition would “substantially reduce the competition” in the UK, in turn causing harm to consumers. The CMA also believes that Call of Duty , if made exclusive to one platform, could tip the balance of competition between consoles. The agency believes this, based on past Microsoft studio acquisitions, that it would likely make Call of Duty an exclusive to its gaming services.
Martin Coleman, chair of the independent panel of experts conducting the Phase 2 investigation, noted:
“Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation. We have provisionally found that this may be the case here. We have also today sent the companies an explanation of how our concerns might be resolved, inviting their views and any alternative proposals they wish to submit.”
Separately, the CMA put forth some possible remedies (PDF) that could cure problems of the deal, though likely not steps Microsoft would be willing to take. The most dramatic would be Microsoft divesting the Activision part of Activision Blizzard—in order to separate Call of Duty from the deal—to a third-party entity who would not create further competition concerns. You can read more about the proposed remedies here.
The CMA said that it “welcomes responses from interested parties to its provisional findings” by March 1 and that “its notice of possible remedies, which sets out potential options for addressing its provisional concerns” can be sent until Feb. 22 that would be considered ahead of it issuing its final report on April 26.