Microsoft’s Activision Blizzard Acquisition Could “Harm Gamers”, UK Regulator Says

Following recent reports, the United Kingdom’s Competition and Markets Authority (CMA) has concluded its five-month investigation Microsoft’s proposed $69 billion acquisition of Activision Blizzard and published its provisional findings, in which the regulatory body echoes its previous statements, saying the deal, should it go through, could potentially “harm gamers” and lead to “higher prices, fewer choices, or less innovation”.

The CMA analyzed over 3 million internal documents, randomly surveyed roughly 40,000 PlayStation Call of Duty gamers in the UK, and “gathered evidence from a range of other gaming console providers, game publishers, and cloud gaming service providers.” In its findings, the body writes that as the owner of Xbox, Windows, Xbox Cloud Gaming, and Azure, Microsoft could potentially gain an unfair advantage with the added ownership of Activision Blizzard.

“The CMA provisionally found that buying one of the world’s most important game publishers would reinforce this strong position and substantially reduce the competition that Microsoft would otherwise face in the cloud gaming market in the UK,” the CMA writes. “This could alter the future of gaming, potentially harming UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC.”

The regulatory body also specifically mentions Call of Duty, noting that the franchise plays “an important role in driving competition” between PlayStation and Xbox consoles, and the prospect of the franchise being exclusive to Xbox (or being “materially worse” on PlayStation) could harm competition and, in turn, UK gamers.

“The CMA’s provisional findings note that this strategy, of buying gaming studios and making their content exclusive to Microsoft’s platforms, has been used by Microsoft following several previous acquisitions of games studios,” the CMA says. “The CMA provisionally found that weakening competition by restricting the access that other platforms have to Activision’s games could substantially reduce the competition between Xbox and PlayStation in the UK, in turn harming UK gamers.

“Xbox and PlayStation compete closely with each other at present and access to the most important content, like CoD, is an important part of that competition. Reducing this competition between Microsoft and Sony could result in all gamers seeing higher prices, reduced range, lower quality, and worse service in gaming consoles over time.”

Meanwhile, Activision Blizzard and Microsoft remain confident that the proposed acquisition will be allowed to go through, and have refuted several concerns brought up by regulatory bodies. In an internal memo seen by GamingBolt sent by Activision Blizzard CEO Bobby Kotick to company employees, he writes, “We are listening carefully and look forward to continuing a constructive discussion with both groups as we work toward deal close. We are also confident that the law – and the facts – are on our side. For example, take the role of competition. When governments look at business transactions like this, they often ask how the landscape will change. Will a merger spur innovation and increase competition across an industry? Or will it create an unfair advantage that prevents others with new ideas and better products from competing?

“In this case, our combined companies will bring more competition to an already crowded field of world-class gaming competitors, including Sony, Tencent, NetEase, Apple, Amazon, and Facebook. We believe this merger gives us additional resources to compete with such giants. When you combine Activision Blizzard’s iconic franchises and mobile expertise with Microsoft’s history of innovation and Xbox’s creative culture and distribution capabilities, we all gain an even brighter future for gaming.”

Additionally, in a statement to VGC, Microsoft’s corporate vice president and deputy general counsel Rima Alaily said: “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.”

Alaily also reiterated Microsoft’s commitment to bring Call of Duty to non-Xbox platforms with complete parity for at least 10 years following the deal’s closure, adding, “When we say equal, we mean equal. 10 years of parity. On content. On pricing. On features. On quality. On playability.”

The CMA has also published a notice of possible remedies that it would consider for the acquisition to be approved, which would entail “a partial divestiture of Activision Blizzard”. This could take the form of selling of the part of the business that deals with Call of Duty, selling off the entire Activision segment of the company (including Call of Duty), or selling off the entire Blizzard Entertainment segment. Barring this, the body says it would opt for prohibition of the deal.

The CMA says it will now be accepting responses to its provisional findings “from interested parties” until March 1, and responses to the aforementioned possible remedies until February 22, before issues a final report on April 26.

Microsoft and Activision Blizzard are also facing increased scrutiny from regulatory bodies in other parts of the world. Last week, the European Commission issued an antitrust warning against the proposed acquisition, while in December, the United States’ Federal Trade Commission filed an antitrust lawsuit against Microsoft in an attempt to block the deal.