UK Watchdog Deepens Probe Into Microsoft’s $69bn Activision Purchase

The UK’s Competition and Markets Authority (CMA) has confirmed it will conduct a Phase 2 investigation of a significant deal involving two American giants.

It was back in January this year when Microsoft announced its biggest acquisitions to date, by acquiring Activision Blizzard in an all-cash transaction valued at a staggering $68.7 billion.

Redmond said at the time that the largest ever gaming deal would accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud, and would provide building blocks for the metaverse.

Regulatory concerns

Microsoft of course has had a huge foothold in the gaming sector since 2001, via its Xbox console and gaming brand.

The planned acquisition will give Microsoft access to a huge library of classic games that span the Playstation, Xbox and PC platforms.

These games include Call Of Duty, World of Warcraft, Diablo, Candy Crush, and of course Starcraft.

Click to read Silicon UK’s Tales in Tech History piece about Microsoft’s gaming adventure.

The acquisition will also provide Microsoft with immediate access to the global eSports activities through Major League Gaming.

But the deal has provoked regulatory concerns.

In July the UK’s CMA said it would begin Phase 1 investigation over whether the deal would reduce competition in the UK.

And the Phase 1 investigation has revealed regulatory concerns, leading to the CMA on Thursday saying it would be begin a deeper Phase 2 investigation.

The CMA said 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 (game streaming).”

“The CMA is concerned that if Microsoft buys Activision Blizzard it could harm rivals, including recent and future entrants into gaming, by refusing them access to Activision Blizzard games or providing access on much worse terms,” the British regulator said.

Received evidence

The CMA said it has also received evidence about the potential impact of combining Activision Blizzard with Microsoft’s broader ecosystem.

It pointed out that Microsoft is already has a leading gaming console (Xbox), a leading cloud platform (Azure), and the leading PC operating system (Windows OS), all of which could be important to its success in cloud gaming.

The CMA said it is concerned that Microsoft could leverage Activision Blizzard’s games together with Microsoft’s strength across console, cloud, and PC operating systems to damage competition in the nascent market for cloud gaming services.

The CMA said these concerns warrant an in-depth Phase 2 investigation.

It has given Microsoft and Activision Blizzard 5 working days (8 September) to submit proposals to address the CMA’s concerns.

If suitable proposals are not submitted, the deal will be referred for a Phase 2 investigation.

Phase 2 investigations will allow an independent panel of experts to probe in more depth the risks identified at Phase 1.

“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,” said Sorcha O’Carroll, Senior Director of Mergers at the CMA.

“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,” said O’Carroll.

Microsoft, Activision response

Microsoft and Activision was quoted by Reuters as saying they would continue to co-operate with the CMA.

“We want people to have more access to games, not less,” Microsoft president and vice chair Brad Smith said.

“Sony, as the industry leader, says it is worried about ‘Call of Duty’, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation,” he said.

Activision said it still expected the deal to close in Microsoft’s financial year to end-June 2023.

The deal will require approval in the United States as well as other major jurisdictions including the European Union and China.

Reuters previously reported that Microsoft would pay a $3 billion break-fee if the deal falls through, according to a source familiar with the matter.