UK competition watchdog says Microsoft’s Activision merger ‘could harm’ gamers

It said that Activision must divest Call of Duty or other segments for the merger to take place.

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The UK's competition authority has found that Microsoft's proposed $69 billion acquisition of Activision Blizzard could result in a "substantial lessening of competition in gaming consoles" and "could harm UK gamers." In a provisional finding, the Competition Markets Authority (CMA) said that Activision may need to be split up into separate businesses for the merger to proceed.

The government said it conducted a wide-ranging probe over the last five months to determine the deal's potential impact. Noting that Microsoft already accounts for 60-70 percent of global cloud gaming services, it said that buying Activision would "reinforce this strong position" and substantially reduce Microsoft's competition in cloud gaming. That in turn could "potentially [harm] UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC."

The CMA said that the deal may work if Activision Blizzard divested parts of its business. Namely, it could split out either the Activision and/or Blizzard segments, or the business that operates its biggest franchise, Call of Duty (CoD). The idea, it said, would be to leave assets "capable of competing effectively under separate ownership" with the new business.

In response, Microsoft said it has already addressed the CMA's concerns over competition. "We are committed to offering effective and easily enforceable solutions that address the CMA’s concerns," Microsoft corporate VP and deputy general counsel Rima Alaily told Engadget in a statement. "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."

First announced last year, the merger would allow Microsoft to add titles like Call of Duty to its already impressive suite of games. The deal ran afoul of regulators from the get-go, though, over concerns that it would block out Sony's PS5 and other consoles from key games, particularly CoD. Rival Sony vehemently opposes the deal, having called it a "game-changer that poses a threat to our industry."

Last September, the CMA announced it was launching an anti-trust investigation into the deal. The US Federal Trade Commission has also sued to block the takeover, and the EU is set to make a decision on April 11th with a statement of objections.

Microsoft said at the time that the CMA's concerns were misplaced and that its arguments were based on "self-serving statements by Sony." In November, it confirmed that it would support Call of Duty on PlayStation "forever" and promised to bring it to Nintendo's Switch consoles and Steam as well.

Microsoft now has until February 22nd to address the CMA's concerns, with a final report from the regulator due April 26th. "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," said Martin Coleman, who chaired a panel of independent experts conducting the probe.