UK challenges Microsoft’s $69bn deal with Activision, citing potential harm to gamers

An Xbox controller on a table next to a Call of Duty game.

Getty Images | Bloomberg

The UK’s Competition and Markets Authority (CMA) is challenging Microsoft and Activision Blizzard to justify their proposed merger, saying the deal “could significantly reduce competition” in the games industry. CMA announcement today cited concerns about “competition in games consoles, multi-game subscription services and cloud gaming (game streaming) services”.

Microsoft announced his project to buy Activision Blizzard for $68.7 billion in January.

“Microsoft is one of three big companies, along with Sony and Nintendo, that have dominated the game console market for the past 20 years with limited entry from new rivals,” the CMA said. “Activision Blizzard owns some of the best-selling and most recognizable game franchises in the world, such as Call of Duty and World of Warcraft. The CMA is concerned that if Microsoft buys Activision Blizzard, it could hurt rivals, including new and future entrants to the game, by denying them access to Activision Blizzard games or offering them access on much worse terms. “

The CMA said these “concerns warrant a full Phase 2 investigation,” so Microsoft and Activision Blizzard were ordered to “submit proposals to address the CMA’s concerns” within five business days. “If suitable proposals are not submitted, the deal will be referred for a Phase 2 investigation,” which “will allow an independent panel of experts to further investigate the risks identified in Phase 1,” the agency said. CMA.

In addition to Microsoft’s Xbox console, the CMA noted Microsoft’s Azure cloud computing platform and Windows operating system. “The CMA is concerned that Microsoft is leveraging Activision Blizzard’s games with Microsoft’s strength on console, cloud and PC operating systems to harm competition in the nascent market for cloud gaming services” , says the ad.

Stage 2

A Phase 2 investigation may lead to the prohibition of a merger or the obligation to sell certain parts of the company. A phase 2 investigation is usually limited to 24 weeks, but can be extended up to eight weeks. After a final report, “the CMA has a statutory period of 12 weeks (extendable up to six weeks for special reasons) to make an order or accept commitments to give effect to its phase 2 remedies”.

In another high-profile case, the CMA launched a Phase 2 investigation of a draft Nvidia/Arm deal. later companies canceled the merger plan.

Amid concerns over the availability of Activision games on non-Xbox platforms, Microsoft said in February he “committed to Sony” that “Call of Duty and other popular Activision titles” will be “available on PlayStation beyond the existing agreement and into the future.” In March, four U.S. senators asked the Federal Trade Commission to review the Microsoft/Activision merger.

“If our current concerns are not resolved, we plan to explore this deal in a full Phase 2 investigation to reach a decision that works in the interests of UK players and businesses,” Sorcha said. O’Carroll, senior director of mergers at CMA.

Microsoft previously completed a $7.5 billion purchase from Bethesda’s parent company, ZeniMax, in March 2021. In November, Microsoft Gaming CEO Phil Spencer confirmed in an interview that Bethesda The Elder Scrolls VI will only be available on Xbox consoles and PC.

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