The U.K.’s Competition & Markets Authority has taken a dim view of Microsoft’s proposed $68.7 billion deal to buy video games giant Activision.
In interim findings published on Wednesday the U.K. regulator said that it has “has provisionally concluded that Microsoft’s proposed acquisition of Activision could result in higher prices, fewer choices, or less innovation for U.K. gamers.”
The U.K. findings represent another serious blow to the proposed acquisition – in the U.S., the Federal Trade Commission has filed an anti-trust lawsuit attempting to stop the deal which it alleged would let Microsoft “suppress competitors” in the sector – though it is not yet the end of the road for the deal. Interested parties have a few weeks to suggest possible remedies to the problems the U.K. regulator identified. The CMA said that it will consider the responses and publish its final report by April 26.
The authority said it had spent five months understanding the deal and its implications. It used an independent survey, gathered evidence from third parties and reviewed over 3 million internal documents from the two businesses.
It the cloud gaming sector, it said: “The evidence available to the CMA currently indicates that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service (or only available on other services under materially worse conditions). Microsoft already accounts for an estimated 60-70% of global cloud gaming services and also has other important strengths in cloud gaming from owning Xbox.”
Concerning the provision of consoles, it said: “The evidence available to the CMA [..] currently indicates that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own consoles (or only available on PlayStation under materially worse conditions).” It noted that this has occurred following “several previous acquisitions of games studios [by Microsoft].”
It provisionally concluded “that weakening competition by restricting the access that other platforms have to Activision’s games could substantially reduce the competition between Xbox and PlayStation in the U.K., in turn harming U.K. gamers.”
Martin Coleman, chair of the independent panel of experts conducting this Phase 2 investigation, said: “It’s been estimated that there are around 45 million gamers in the U.K., and people in the U.K. spend more on gaming than any other form of entertainment including music, movies, TV, and books. Strong competition between Xbox and PlayStation has defined the console gaming market over the last 20 years. Exciting new developments in cloud gaming are giving gamers even more choice […] We have also today sent the companies an explanation of how our concerns might be resolved, inviting their views and any alternative proposals they wish to submit.”
Microsoft responded to the findings with a statement from Rima Alaily, corporate VP and deputy general counsel.
“We are committed to offering effective and easily-enforceable solutions that address the CMA’s concerns. Our commitment to grant long term 100% 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. 75% of respondents to the CMA‘s public consultation agree that this deal is good for competition in U.K. gaming.”
Activision also released a statement in response: “These are provisional findings, which means the CMA sets forth its concerns in writing, and both parties have a chance to respond. We hope 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 confident they are getting great choices and fair deals, where competitive, fair-dealing business can innovate and thrive, and where the whole UK economy can grow productively and sustainably.”
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