UK regulator suggests removing Call of Duty from Microsoft’s Activision Blizzard acquisition

The UK Competition and Markets Authority (CMA) has published its interim conclusion on Microsoft’s proposed acquisition of Activision Blizzard and has proposed that Call of Duty be removed from the deal as a possible compromise.

After a five-month investigation, the UK regulator has provisionally found that the deal could reduce competition and “result in higher prices, less choice or less innovation for UK players”. He also believes that Call of Duty and other franchises will be important to the growth of cloud streaming and that Microsoft can remove the competition by making these games exclusive to its cloud offering.

That means regulators in the United States, the European Union and the United Kingdom have now issued objections to the $69 billion deal.

The CMA has suggested that a “partial divestiture of Activision Blizzard” would be a solution it would consider to approve the acquisition.

This can mean either:

Sale of Call of Duty businessSale of Activision segment of Activision BlizzardSale of Activision and Blizzard segments

The other possible “solution” given to the CMA would be to ban the merger altogether, he said.

The regulator says Microsoft has informed it of its commitments to keep Call of Duty on rival platforms such as the PlayStation and Nintendo Switch, and says it would potentially consider this kind of remedy, but would prefer a structural solution such as removing Activision from the agreement as a whole as it requires less ongoing enforcement.

In addition, the regulator says it will consider “any other viable means” that Microsoft or any interested third party may propose that may be effective in addressing its concerns.

The CMA is now inviting responses from stakeholders to its list of proposed remedies by 22 February and responses to its interim findings by 1 March. The CMA’s final report is expected by April 26.

As part of its investigation, the UK regulator said it heard directly from business leaders at Microsoft and Activision, analyzed more than 3 million internal documents from both businesses, commissioned an independent study of UK gamers and Combined and collected evidence from a number of other games. console providers, game publishers and cloud gaming service providers.

In a statement to VGC, Microsoft corporate vice president and deputy general counsel Rima Alaily said: “We are committed to providing effective and easily implementable solutions that address CMA’s concerns.

“Our commitment to giving Sony, Nintendo, Steam and others long-term, 100% equal access to Call of Duty preserves the benefits of the deal for players and developers and increases competition in the marketplace.

“75% of respondents to the CMA’s public consultation agree this deal is good for competition in UK gaming.”

Reiterating the “100% equal access claim,” Alaily added: “What does 100% mean? When we say equal, we mean equal. 10 years of equality. On content. On price. On features. On quality. On playability .”

Activision Blizzard said in its statement: “These are interim findings, meaning that the CMA puts its concerns in writing and both sides have a chance to respond.

“We hope that between now and April we will be able to help the CMA better understand our industry to ensure they can achieve their stated mandate to promote an environment where people can be safe that they are getting great choices and fair deals, where competitive, fair business can innovate and thrive, and where the whole UK economy can grow productively and sustainably.”

Much of the controversy surrounding the Microsoft acquisition revolves around Call of Duty, which Sony claims may be somewhat hidden behind the deal

In its provisional conclusion, the CMA claims that the proposed merger would have a negative impact on both the supply of cloud gaming services and the supply of consoles.

He claims that by buying Activision Blizzard, Microsoft would “significantly reduce competition that [it] otherwise it would face the cloud gaming market in the UK”.

It also says that evidence made available to it, including “data about how Microsoft measures customer value in the ordinary course of business,” suggests “that Microsoft would find it commercially beneficial to make Activision’s games exclusive for its own consoles (or only available on PlayStation under materially worse conditions)”.

It says: “Xbox and PlayStation compete closely with each other currently, and access to the most important content, such as Call of Duty, is an important part of that competition.

“The reduction of this competition between Microsoft and Sony could result in all gamers seeing higher prices, reduced range, lower quality and worse service on game consoles over time.”

Martin Coleman, chairman of the independent expert panel carrying out the CMA’s Phase 2 investigation, said: “There are an estimated 45 million gamers in the UK and people in the UK spend more on games than any other form of entertainment, including music , movies, TV and books.

“Fierce competition between Xbox and PlayStation has defined the console gaming market for the past 20 years. Exciting new developments in cloud gaming are giving players even more choices.

“Our job is to ensure that UK players are not caught in the crossfire of global deals which, over time, could damage competition and result in higher prices, less choice or less innovation. We have tentatively found that this may be the case here.

“We have also today sent the companies an explanation of how our concerns can be resolved, inviting their views and any alternative proposals they wish to submit.”

What would have been the games industry’s biggest deal to date has faced fierce opposition from Sony and concerns from European, US and UK regulators.

Last week, the EU issued Microsoft with a charge sheet outlining its concerns about the $69 billion deal.

According to a recent New York Times report, Microsoft believes that the United Kingdom and the European Commission are open to possible solutions and hopes to convince them to accept concessions and approve the deal.

That, in turn, could make it easier to reach a settlement with the FTC ahead of a trial scheduled for later this year, it is claimed. At the same time, it is claimed that any of the three agencies could pressure the others to oppose the acquisition.

In December, the FTC announced plans to sue Microsoft in a bid to block its $69 billion acquisition of Activision Blizzard, which the regulator argues would allow the company to “squeeze out competitors” on its Xbox console, the content of subscription and cloud gaming business.

According to a recent report, the motivation behind the FTC’s lawsuit was to try to dissuade EU regulators from accepting a settlement that allows the deal.