UK regulator says Microsoft’s proposed $68.7B Activision merger could create ‘higher prices, fewer choices’ • TechCrunch

Seven months after the U.K.’s Competition and Markets Authority (CMA) confirmed it was launching an antitrust investigation into Microsoft’s $68.7 billion bid for video game giant Activision Blizzard, the U.K. competition regulator has provisionally concluded that the merger “could harm U.K. gamers” through higher prices, fewer choices, or less innovation.

Microsoft first revealed plans for its mega-bucks Activision acquisition last January, a deal that would make Microsoft the third-biggest gaming company in the world by revenue behind Tencent and Sony. More importantly, it would also give Microsoft direct access to well-known franchises such as Call of Duty and World of Warcraft.

Scrutiny

The deal has garnered significant scrutiny from the get-go, with various bodies around the globe noting that Microsoft could use its clout to limit the distribution of Activision Blizzard games to rival distributors and platforms. The European Union (EU) is currently engaged in an in-depth probe, and reportedly issued Microsoft with a formal warning last week, while the Federal Trade Commission (FTC) in the U.S is suing to block the deal. The U.K., meanwhile, announced its in-depth investigation back in September, noting at the time that the merger could result in a “substantial lessening of competition” in the U.K. gaming market.

Now, the U.K. has pretty much cemented that hypothesis in stone, saying that if the deal was greenlighted there it may strengthen Microsoft’s cloud gaming credentials and stifle competition, leading to higher prices if Microsoft was to drive rival gaming companies out of the market.

Indeed, the CMA notes that the deal could weaken its rivalry with Sony, with operates the competing PlayStation console. Call of Duty, for example, is presently available across Microsoft’s Xbox and Sony’s PlayStation consoles, among other platforms. World of Warfare, meanwhile, is currently only available on PCs. In a world where Microsoft pulls the strings, things could look a lot different.

The CMA’s report said:

The evidence available to the CMA, including data on how Microsoft measures the value of customers in the ordinary course of business, 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).

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.

In terms of what happens next, today’s announcement is essentially to solicit more feedback from “interested parties,” which will of course include both Microsoft and Activision Blizzard, as well as competitors. The various parties have until March 1, 2023, to respond, with the CMA sending the two companies a separate report explaining how its concerns might be addressed.

The CMA said it expects to file its final report by April 26, 2023.