Microsoft's buyout of Activision Blizzard "could lead to competition concerns" say UK regulators

Further investigation of Microsoft’s $68.7 billion takeover of Activision Blizzard is needed by the UK’s competition regulator, a statement on the government’s website confirmed today. The Competition and Markets Authority (CMA) began the preliminary stage of their investigation at the beginning of July, with a deadline set for September 1st. That initial stage of investigation found that the deal could “substantially lessen competition in gaming consoles, multi-game subscription services, and cloud gaming services”.

“Following our Phase 1 investigation, we are concerned that Microsoft could use its control over popular games like Call of Duty and World of Warcraft post-merger to harm rivals, including recent and future rivals in multi-game subscription services and cloud gaming,” Sorcha O’Carroll, Senior Director of Mergers at the CMA, said. Microsoft have already been through this with the New Zealand Commerce Commission back in June.

Evidence on the potential effects of combining Activision Blizzard’s products with Microsoft’s console, cloud and PC businesses had been provided to the first phase of the CMA’s investigation, which they felt could damage competition in the developing cloud gaming market. Microsoft and Activision Blizzard now have five working days to address the CMA’s concerns. If the companies don’t manage to do that then the deal will be referred for a second phase investigation by an independent panel of experts. They’ll engage more with third-parties and have powers to gather internal documents.

Microsoft Gaming’s CEO Phil Spencer has responded publicly to the CMA’s decision with a statement titled “gaming for everyone, everywhere”. Spencer acknowledged that Microsoft intend to bring Activision Blizzard’s stable of games, including Overwatch, Diablo and Call Of Duty, to the Game Pass streaming service in the future. He also committed Microsoft to making Call Of Duty available on PlayStation the same day it launches on other platforms, with version parity, pointing to the example of Minecraft as a cross-platform success story.

“We will continue to engage with regulators with a spirit of transparency and openness as they review this acquisition. We respect and welcome the hard questions that are being asked,” Spencer said. “The gaming industry today is robust and dynamic. Industry leaders, including Tencent and Sony, continue to expand their deep and extensive libraries of games as well as other entertainment brands and franchises, which are enjoyed by players everywhere.” Spencer is likely referring to Tencent and Sony’s increased investment in Elden Ring developers FromSoftware, revealed yesterday.

Microsoft announced their intention to acquire Activision Blizzard in January, with the deal expected to complete by the end of Microsoft’s fiscal year on June 30th, 2023. Activision Blizzard stockholders voted by a 98% majority in favour of the buyout at a meeting in April. Politicians in other countries, including the United States, have shown concern over the buyout, although Saudi Arabia already approved the deal in August.

You can read the CMA’s full report on their findings from the first stage of investigation here. This is usually the point where I bring up how the consolidation of the games industry is continuing apace. That might not be the case, this time. I’ll continue to bring you any more developments as the CMA’s investigation into the deal continues.