The UK competition regulator has ruled that Microsoft’s $68.7bn (£59.6bn) deal to buy Activision Blizzard, the video game publisher behind hits like Call of Duty, will result in higher prices and less competition for gamers. from United Kingdom.
The Competition and Markets Authority (CMA), which launched a comprehensive investigation in September after raising concerns about the biggest acquisition in technology history, said the deal would weaken global rivalry between Microsoft’s Xbox and Sony’s PlayStation consoles.
“Our job is to make sure UK players don’t get caught in the crossfire of global deals that, over time, could hurt competition and lead to higher prices, less choice or less innovation,” said Martin Coleman, president of the independent panel of experts conducting the research. “We have tentatively found that this may be the case here.”
The CMA said possible remedies to address competition concerns included selling or spinning off the business that makes Call of Duty, or the entire Activision arm of Activision Blizzard combined.
However, the watchdog acknowledged that a spin-off into a stand-alone operation would mean the new business “may not have sufficient assets and resources to operate as a stand-alone entity.”
While the CMA did not completely rule out measures other than a divestment, for example a “behavioral remedy” such as a gold-plated license to secure distribution of Call of Duty to Sony, it did say that a structural solution such as a partial sale, spin -turning off or completely blocking the deal was his preferred option.
“We are of the initial view that any behavioral remedy in this case is likely to present material risks of effectiveness,” he said. “At this stage, the CMA considers that certain divestments and/or prohibitions are, in principle, feasible remedies in this case.”
The CMA said there was a risk under the deal that Microsoft could try to make Call of Duty, Activision’s flagship game and one of the most popular and profitable global franchises of all time, exclusively available to console owners. Xbox.
Last year, Microsoft tried to allay competition concerns by saying it would offer rival Sony a 10-year license to ensure the title would stay on its Playstation consoles.
However, following Microsoft’s $7.5 billion acquisition of ZeniMax in 2020, the father of the studios behind games like The Elder Scrolls, Fallout, and Doom, Microsoft moved to make some exclusive titles for its own devices. .
The company had previously assured European regulators that it had no incentive to make such a move.
“It would be commercially beneficial for Microsoft to make Activision’s games exclusive to its own consoles, or only available on PlayStation under materially worse conditions,” the CMA said. “This strategy of buying game studios and making their content exclusive to Microsoft platforms has been used by Microsoft after several previous game studio acquisitions.”
The CMA said the end result could be that gamers would see “higher prices, reduced range, lower quality, and worse service on game consoles over time.”
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Microsoft said it believed its 10-year guarantee to continue offering Call of Duty to rivals on a level playing field would be enough to allay concerns about competition.
“We are committed to delivering effective and easy-to-apply solutions that address CMA concerns,” said Rima Alaily, corporate vice president and deputy general counsel at Microsoft. “Our commitment to grant long-term 100% equal access to Call of Duty to Sony, Nintendo, Steam and others preserves the benefits of the agreement for players and developers and increases competition in the marketplace.”
The CMA ruling is critically important as it comes ahead of the publication of the official results of investigations by the European Commission and the US Federal Trade Commission, which launched legal action in December to block the agreement.
“We hope between now and April we can help the CMA better understand our industry,” an Activision Blizzard spokesperson said. “To ensure that they can fulfill their stated mandate to promote an environment in which people can be sure they are getting great options and fair deals, in which competitive and fair businesses can innovate and prosper, and in which the entire economy of the UK can grow productively and sustainably. .”
Microsoft’s cash offer for Activision Blizzard, which also publishes global hits like World of Warcraft and Candy Crush, dwarfs its biggest previous deal, the $26 billion acquisition of LinkedIn in 2016.
The purchase would make the Xbox maker the world’s third-biggest gaming company by revenue behind China’s Tencent and Japan’s Sony, the maker of PlayStation game consoles. It’s also the biggest deal in the technology’s history, eclipsing the $67 billion Dell paid to buy digital storage company EMC in 2015.
