UK regulator now says Microsoft Activision merger won’t significantly lessen competition in console gaming
UPDATE: Microsoft responds as the CMA narrows the scope of its concerns about the deal
The UK’s Competition and Markets Authority (CMA) has said it no longer believes that Microsoft’s proposed acquisition of Activision Blizzard will significantly reduce competition in the console gaming space.
The watchdog said on Friday that it has updated its provisional findings after receiving fresh evidence that alleviated some of its concerns about the $69 billion deal.
While the CMA originally believed that making Call of Duty exclusive to Xbox could be commercially beneficial for Microsoft, it said that new data it has received “indicates that this strategy would be significantly loss-making under any plausible scenario”.
Update
Microsoft and Activision have welcomed today’s announcement by the CMA.
“We appreciate the CMA’s rigorous and thorough evaluation of the evidence and welcome its updated provisional findings,” a Microsoft spokesperson told CNBC.
“This deal will provide more players with more choice in how they play Call of Duty and their favorite games. We look forward to working with the CMA to resolve any outstanding concerns.”
An Activision spokesperson said the updated provisional findings “show an improved understanding of the console gaming market and demonstrate a commitment to supporting players and competition.”
They added: “Sony’s campaign to protect its dominance by blocking our merger can’t overcome the facts, and Microsoft has already presented effective and enforceable remedies to address each of the CMA’s remaining concerns. We know this deal will benefit competition, innovation, and consumers in the UK.”
In light of this, the CMA has narrowed the scope of its concerns about the deal.
“Provisional findings are a key aspect of the merger process and are explicitly designed to give the businesses involved, and any interested third parties, the chance to respond with new evidence before we make a final decision,” said Martin Coleman, chair of the independent panel conducting this CMA’s investigation.
“Having considered the additional evidence provided, we have now provisionally concluded that the merger will not result in a substantial lessening of competition in console gaming services because the cost to Microsoft of withholding Call of Duty from PlayStation would outweigh any gains from taking such action.
“Our provisional view that this deal raises concerns in the cloud gaming market is not affected by today’s announcement. Our investigation remains on course for completion by the end of April.”
The CMA previously expressed concerns that the proposed acquisition could significantly reduce PlayStation’s ability to compete with Microsoft given that it would see the Xbox maker gain ownership of the Call of Duty series, which Sony has called “irreplaceable”.
In a bid to gain approval for the deal, Microsoft has told regulators it’s willing to make each new Call of Duty game available on PlayStation the same day it comes to Xbox for a 10-year period, with full content and feature parity.
In an attempt to address concerns about the impact the merger will have on the cloud gaming market, Microsoft also recently announced several deals to bring Call of Duty to third-party cloud gaming platforms should the acquisition be approved.
The CMA’s final report ruling on the Activision Blizzard deal is due by April 26.
Further reading
Microsoft says 10 years is ‘sufficient for Sony to develop Call of Duty alternatives’
Responding to the news, Ampere Analysis analyst Piers Harding-Rolls said the deal now has a greater chance of being approved by the CMA.
“With structural remedies being less relevant, today’s updated findings swings the pendulum back in favour of the deal being approved by the CMA and it completing overall,” he wrote.
“It now just remains to be seen how Microsoft and the CMA deal with the concern around cloud gaming services.
“Recent cloud gaming partnership deals that Microsoft has signed are relevant, but I’m not sure if these completely satisfy any/all concerns around the inherent advantages Microsoft holds when it comes to its cloud infrastructure”.
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