Activision’s takeover of Microsoft might damage avid gamers, UK regulator says

A Call of Duty: Modern Warfare video game from Activision Blizzard is inserted into Microsoft’s Xbox One video game console in Denver, Colorado on Wednesday, January 19, 2022.

Michael Ciaglo | Bloomberg | Getty Images

This was announced by the British competition authority on Wednesday Microsoft’s The $69 billion acquisition of gaming giant Activision Blizzard could hurt competition in the UK gaming market.

In a press release on Wednesday, the Competition and Markets Authority said the acquisition would likely result in a significant reduction in competition, leading to higher prices, less choice and less innovation.

The CMA has sent letters to Microsoft and Activision Blizzard outlining possible remedies to their concerns. Companies have until February 22 to respond. The regulator has not publicly released its proposed remedies.

The CMA is expected to make a final decision on April 26. It could enforce “behavioral remedies,” or require Microsoft to sell Activision or end its acquisition attempt.

Shares of Activision Blizzard fell 4.6% in premarket trading in the US following the CMA announcement on Wednesday.

“We are committed to providing effective and easily enforceable solutions that address the concerns of the CMA,” said Rima Alaily, Microsoft’s corporate vice president and deputy general counsel, in an emailed statement to CNBC.

“Our commitment to giving Sony, Nintendo, Steam and others 100% equal access to Call of Duty long term preserves the benefits of the deal for players and developers and increases competition in the market.”

Microsoft defines “100% Equal Access” as offering 10 years of parity in content, pricing, features, quality and playability.

“These are preliminary findings, meaning that the CMA is providing a written statement of its concerns and both parties have an opportunity to respond,” an Activision Blizzard spokesperson said in an emailed statement.

“By April, we hope to help the CMA better understand our industry to ensure it can fulfill its stated mission of fostering an environment where people can trust they are finding great choices and fair deals.” where competitive, fair trade businesses can innovate and thrive and where the whole of the UK economy can grow productively and sustainably.”

Activision CEO Bobby Kotick also sent an internal memo to employees saying the company is “confident that the law — and the facts — are on our side.”

He added: “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.”

The CMA announcement said the regulator was concerned that the Activision deal could strengthen Microsoft’s position in the cloud gaming market and add lucrative titles to its cloud-based Xbox Game Pass platform. This would allow gamers to play games on devices other than the console over the internet.

Cloud gaming is still in its infancy and is not yet a mass market technology.

The CMA went on to say that the deal could benefit Microsoft’s console business. The tech titan “would find it commercially advantageous to make Activision’s games exclusive to its own consoles (or only make them available on PlayStation under much worse terms),” the regulator said.

Microsoft is committed to this Sony And Nintendo continue to release its new Call of Duty games on their respective PlayStation and Switch gaming platforms for 10 years.

The Activision deal is also under scrutiny in the US and European Union. On the state side, the Federal Communications Commission is trying to block the purchase on competitive grounds, while the European Commission is also conducting a competition investigation into the transaction. The commission has filed an indictment, known as the Statement of Objections, outlining its concerns about the deal, according to Reuters.