Microsoft-Activision Deal Will Hurt UK Gamers, Says Watchdog

The UK's competition watchdog is throwing more water on Microsoft's controversial $69 billion bid for Activision Blizzard, saying an acquisition could hit gamers with higher prices and fewer choices.

The Competition and Markets Authority (CMA) said Wednesday that after a five-month investigation, it is "provisionally" concluding that the deal would hurt competition and innovation and thus hurt those citizens who play Call of Duty and other popular games.

According to Martin Coleman, chair of the independent panel of experts that conducted the "Phase 2" investigation, about 45 million UK gamers as well as other people in the country spend more on gaming than on music, movies, TV or books.

"Strong competition between Xbox and PlayStation has defined the console gaming market over the last 20 years," Coleman said in a statement. "Exciting new developments in cloud gaming are giving gamers even more choice. Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation.

"We have provisionally found that this may be the case here."

The CMA sent Microsoft and Activision an explanation of its concerns and how they might be resolved. It also said both can submit their views and alternative proposals.

Microsoft's regulatory problems

The authority's finding is another smack in the head to Microsoft as it tries to navigate already roiling regulatory waters. EU agencies are poring over the proposed acquisition and the US Federal Trade Commission is suing Microsoft to block the deal.

At the same time, some tech companies, most recently Google and Nvidia last month, are balking at the deal.

At issue are popular Activision games like Call of Duty and World of Warcraft. The CMA, echoing other regulators, said that Microsoft through its Xbox business already holds a strong share of the cloud gaming services space – about 60 to 70 percent, the authority noted – as well as the Windows operating system.

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"Buying one of the world's most important game publishers would reinforce this strong position and substantially reduce the competition that Microsoft would otherwise face in the cloud gaming market in the UK," the CMA said. "This could alter the future of gaming, potentially harming UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC."

Microsoft promises equal access

Microsoft reiterated that it is making Call of Duty and other games available to its competitors. Rima Alaily, corporate vice president and deputy general counsel at Microsoft, told The Register in a statement that the company is "offering effective and easily enforceable solutions that address the CMA's concerns."

"Our commitment to grant long-term 100 percent equal access to Call of Duty to Sony, Nintendo, Steam and others preserves the deal's benefits to gamers and developers and increases competition in the market," Alaily said, adding that "75 percent of respondents to the CMA's public consultation agree that this deal is good for competition in UK gaming."

She noted that "equal access" means "10 years of parity. On content. On pricing. On features. On quality. On playability."

CMA isn't so sure

Despite Microsoft's promises of parity, the CMA said it is concerned that competition in the gaming market will take a hit. Activision games play important roles in the console competition and that the "evidence available to the CMA" indicates that Microsoft would be inclined to make those games exclusive to Xbox or let PlayStation release them under "materially worse conditions."

"The CMA's provisional findings note that this strategy, of buying gaming studios and making their content exclusive to Microsoft's platforms, has been used by Microsoft following several previous acquisitions of games studios," the agency said.

Keeping the competition strong between Microsoft and Sony is important, the CMA said, noting that in 2022, about £5 billion ($6.04 billion) was spent on gaming in the UK, with gamers spending most of that money on a few of the most popular games, including Call of Duty.

In brief comments Tuesday, CEO Satya Nadella said that combining Microsoft and Activision will bring more competition to the industry, including in areas where Microsoft is trailing, as in the console market in Japan.

"I hope that regulators will take an approach that will be truly be beneficial to gamers, it's going to be beneficial to all publishers, and make all of gaming more competitive," Nadella said.

The CMA is scheduled to make its final decision April 26. The agency has not shied away from taking on deals involving large tech companies. Meta in October 2022 ditched its $400 million bid for Giphy, a GIF database and search engine, after the CMA said it would harm social media users and advertisers. ®