The UK’s Competition and Market Authority bureau issued a provisional conclusion to its Phase 2 investigation of Microsoft’s bid to purchase Activision Blizzard, which finds the deal harmful to competition in the market.
Earlier today, the CMA released its provisional findings and sent Microsoft an explanation of its concerns that could possibly be resolved with an alternative proposal submitted.
Core to the CMAs concerns was that a merger between Microsoft and Activision could make the former an even stronger presence in cloud gaming which could result in stifling competition in an emerging market and ultimately harming UK gamers who cannot afford consoles and are forced to use a single cloud provider for gaming.
The CMA also provided rhetoric in its conclusion that closely aligns with arguments Sony’s continually espoused throughout the investigative process that include,
The CMA provisionally found that a small number of key games, including Call of Duty (CoD), Activision’s flagship game, play an important role in driving competition between consoles. The evidence available to the CMA, including data on how Microsoft measures the value of customers in the ordinary course of business, currently indicates that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own consoles (or only available on PlayStation under materially worse conditions).
The CMA’s provisional decision comes after a wide-ranging five-month investigation in which the bureau conducted site visits and hearings from Microsoft and Activision, analyzing over 3 million internal documents, commissioning independent surveys of UK gamers, hearing from competitors and cloud services providers.
While Microsoft has already made public that it intends to offer Sony an extended 10-year deal to license current and future Call of Duty games on the PlayStation platform, the company will have a few weeks to come up with other “remedies” to address the provisional concerns of the CMA.
The CMA welcomes responses from interested parties to its provisional findings by 1 March 2023 and its notice of possible remedies, which sets out potential options for addressing its provisional concerns, by 22 February 2023. These will be considered ahead of the CMA issuing its final report, which is due by 26 April 2023.
Despite the unfavorable decision by the CMA today, Microsoft remains optimistic and committed to finding a resolution to its bid for Activision and issued the following statement,
We are committed to offering effective and easily enforceable solutions that address the CMA’s concerns. Our commitment to grant long term 100% equal access to Call of Duty to Sony, Nintendo, Steam and others preserves the deal’s benefits to gamers and developers and increases competition in the market. 75% of respondents to the CMA‘s public consultation agree that this deal is good for competition in UK gaming.
Today’s decision marks the first of three potentially large hurdles Microsoft and Activision Blizzard will need to clear by June of 2023 in order to successfully merge.
The Federal Trade Commission (FTC) has already strongly come out against Microsoft and Activision Blizzard merging and will undoubtedly use the CMA’s recent findings as precedent in its own arguments, and the European Union is also in the midst of its secondary investigation into the deal.