UK Regulator Eases Some Competition Concerns in Microsoft's $69bn Activision Deal
  • March 24, 2023
  • Jacob Morris
  • 0

The UK’s antitrust regulator, the Competition and Markets Authority (CMA), has updated its provisional findings regarding Microsoft’s $68.7 billion acquisition of video game company Activision Blizzard. The CMA’s original analysis suggested that the merger “could harm UK gamers” by reducing choice, innovation, or raising prices. The CMA’s updated position “provisionally alleviates” concerns about the supply of game consoles in the UK. However, the CMA’s concern about the deal’s impact on cloud gaming remains unchanged, and the investigation continues. The watchdog is expected to release a final report on April 26, 2023.

The CMA has issued an update on the case, stating that it has received a substantial amount of new evidence in response to its original provisional findings. After evaluating this new evidence carefully, along with the extensive range of information gathered before issuing the provisional findings, the CMA inquiry group has revised its provisional conclusions. The CMA now believes that the transaction will not significantly lessen competition in relation to console gaming in the UK.

The CMA’s most significant new evidence relates to Microsoft’s financial incentives to make Activision’s games, such as Call of Duty, exclusive to its own consoles. The CMA’s original analysis indicated that such a strategy would be profitable under most scenarios. However, new data now indicates that this strategy would result in significant losses under any plausible scenario. As a result, the CMA’s updated analysis shows that it would not be commercially beneficial for Microsoft to make Call of Duty exclusive to Xbox following the merger. Microsoft would still have the incentive to continue making the game available on PlayStation.

The CMA has not acknowledged publicly any errors in its financial modelling, but it has suggested that the new evidence relating to Microsoft’s financial incentives around Activision’s games indicates that the tech giant would suffer significant losses if it were to withhold them from rival games consoles. The CMA’s provisional view is that this is not a competition concern.

The CMA has not revised its concerns about the deal’s impact on cloud gaming. It said it is “continuing to carefully consider the responses provided in relation to the original provisional findings.” Martin Coleman, chair of the independent panel of experts conducting the CMA investigation, said that provisional findings are a crucial aspect of the merger process and are designed to allow businesses involved and interested third parties to respond with new evidence before a final decision is made.

In its response to the provisional findings, Microsoft dubbed the CMA’s provisional cloud gaming concerns “misplaced.” The company argued that proposed ten-year licensing agreements, with Nintendo and NVIDIA to bring Call of Duty to more gamers on both console and cloud gaming services, mean that UK gamers stand to benefit “significantly” if Microsoft is allowed to become the owner of Activision.

Jacob Morris

Journalist writer interested in collecting computer news and modern technology. Worked on many websites and news organizations. You can contact him via e-mail: [email protected]

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