The UK Competition and Markets Authority (CMA) has today announced outstanding concerns about the upcoming Microsoft acquisition of Activision Blizzard, citing competition as a key issue that must be investigated further before the US $68.7 billion deal can go through.
Working alongside several third parties, the CMA has spent the last few months gathering details and feedback about the acquisition. Now, the results of this feedback have been made clear.
‘Following our Phase 1 investigation, we are concerned that Microsoft could use its control over popular games like Call of Duty and World of Warcraft post-merger to harm rivals, including recent and future rivals in multi-game subscription services and cloud gaming,’ Sorcha O’Carroll, senior director of mergers at CMA said in a public statement.
‘If our current concerns are not addressed, we plan to explore this deal in an in-depth Phase 2 investigation to reach a decision that works in the interests of UK gamers and businesses.’
Microsoft now has the opportunity to directly address these concerns – although given it recently spoke out about this exact criticism in a filing to the Brazil Administrative Council for Economic Defense, it likely won’t be long before the company allays the proposed concerns.
According to Microsoft, making franchises like Call of Duty exclusive is not currently on the agenda post-acquisition, given it would not be cost effective for any parties involved.
‘Regardless of how unsurprising Sony‘s criticism of content exclusivity is – given that PlayStation’s entire strategy has been centred on exclusivity over the years – the reality is that the strategy of retaining Activision Blizzard’s games by not distributing them in rival console shops would simply not be profitable for Microsoft,’ the recent filing stated.
This argument directly addresses the concerns of the CMA, and will likely be reiterated by Microsoft before an upcoming 8 September 2022 CMA counter-proposal deadline. The CMA has claimed that without a suitable proposal, a formal deep dive investigation will begin. This would involve an independent panel scrutinising the deal, and evaluating the results of reduced competition in the market.
While a formal statement has yet to be filed, Microsoft president and vice chair Brad Smith has committed to working with the CMA on next steps.
‘We’re ready to work with the CMA on next steps and address any of its concerns. Sony, as the industry leader, says it is worried about Call of Duty, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation. We want people to have more access to games, not less,’ Smith said in the wake of the CMA report.
Going forward, the company will look to make a formal address, and double down on its non-exclusivity stance. The Activision Blizzard deal still has several hurdles to mount before it can be completed, with the CMA scrutiny being the latest challenge for Microsoft’s endeavour.
‘We will continue to engage with regulators with a spirit of transparency and openness as they review this acquisition,’ Phil Spencer, CEO of Microsoft Gaming, said in a blog post response. ‘We respect and welcome the hard questions that are being asked.’