Regulators in the UK expressed concern about the competitive implications of Microsoft’s $68.7 billion deal to acquire Activision-Blizzard, saying it could hamper the ability of Sony and other companies to compete on a level playing field in consoles, cloud gaming, and game subscription services.
The UK’s Competition and Markets Authority cited the risks of Microsoft controlling Activision-Blizzard’s valuable portfolio of top-selling video-game franchises, such as World of Warcraft and Call of Duty, in announcing its decision Thursday to refer the case for a more in-depth Phase 2 investigation.
“The CMA is concerned that if Microsoft buys Activision Blizzard it could harm rivals, including recent and future entrants into gaming, by refusing them access to Activision Blizzard games or providing access on much worse terms,” the regulators said in a news release announcing the decision.
Microsoft responded by reiterating its pledge to keep Call of Duty available on the same day on both Xbox and Playstation. In general, the company will follow a “principled path” if it’s able to proceed with the acquisition, wrote Microsoft Gaming CEO Phil Spencer in a post about the news.
The company released this statement from Brad Smith, Microsoft’s president: “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.”
In a detailed explanation of its decision, the CMA made it clear that Microsoft’s pledge wasn’t enough to alleviate its concerns about the potential impact of the acquisition on the gaming market. They presented two “theories of harm” that were explored in the first phase of their investigation.
- Microsoft withholding or degrading [Activision Blizzard] content—including popular games such as Call of Duty—from other consoles or multi-game subscription services;
- Microsoft leveraging its broader ecosystem together with [Activision Blizzard’s] game catalogue to strengthen network effects, raise barriers to entry and ultimately foreclose rivals in cloud gaming services.
Among other factors, they cited Microsoft’s existing strength in related markets including PC operating systems (Windows) and game consoles (Xbox).
“The CMA is concerned that, by leveraging [Activision Blizzard’s] content and Microsoft’s wider ecosystem, Microsoft will have an unparalleled advantage over current and potential cloud gaming service providers. This could result in increased concentration in cloud gaming services or the market ‘tipping’ to Microsoft, and ultimately deny consumers the benefits of competition between new and emerging providers vying to succeed in cloud gaming,” the regulators wrote.
With the announcement, Microsoft and Activision Blizzard will have five working days to submit proposals to address the concerns. If those proposals aren’t sufficient, the process will move to the next phase, in which an independent panel of experts investigates the issues in more depth.
