Microsoft to Face In-Depth Investigation for Activision Blizzard Acquisition by UK Authorities

Microsoft is openly asking for the approval of its acquisition of Activision Blizzard at the same time when the UK’s Competition and Markets Authority (CMA) has voiced reservations. Microsoft shocked the gaming industry earlier this year when it announced plans to buy Activision Blizzard for $68.7 billion, the largest-ever deal of its stature in the industry. 

The UK’s CMA has stated that it is “concerned that Microsoft’s anticipated purchase of Activision Blizzard could substantially lessen competition in gaming consoles, multi-game subscription services, and cloud gaming services” and that if Microsoft is unable to address its concerns within five working days, the CMA will move on to what it refers to as a “Phase 2 investigation.”

Sorcha O’Carroll, Senior Director of Mergers at the CMA, comments on the investigation, saying:

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 competitors in multi-game subscription services and cloud gaming. If our current concerns are not addressed, we plan to explore this deal in an in-depth Phase 2 investigation to reach a decision that works in the interests of UK gamers and businesses.”

In Phase 2, an impartial panel will investigate Microsoft’s agreement in greater detail and determine if having influence over games like Call of Duty and World of Warcraft will hurt competitors. Phil Spencer, the CEO of Microsoft Gaming and head of Xbox, responded by outlining Microsoft’s viewpoint in a blog post today.

Phil Spencer has also expressed confidence in the steps Microsoft is taking toward its intended acquisition of Activision Blizzard in an interview with Bloomberg that was published last week. At the same time, he acknowledged he was in an unfamiliar situation, given the transaction size.

In the documents submitted to Brazil’s Administrative Council for Economic Defense (CADE), regulator Microsoft asserted that stopping the sale of titles like Call of Duty through competing console retailers “would simply not be profitable” for the business.

The company claims that a strategy of not releasing Activision Blizzard games on competing consoles would only be profitable if the games could draw a sizable number of players over to the Xbox ecosystem, resulting in revenue to make up for losses from not releasing these titles on competing consoles.

The CMA stated that Microsoft and Activision Blizzard now have until September 8 to submit suggestions resolving its concerns and that the merger would be submitted for further examination if adequate alternatives are not received. Several agencies closely examine the planned transaction in light of growing coalitions and worries about potential antitrust difficulties.