cma says that microsoft-activision merger could be harmful to uk gamers

The Competitions and Markets Authority (CMA) of the United Kingdom just expressed its concerns about the impact that the acquisition of Activision-Blizzard by Microsoft could have on gamers within the United Kingdom.

In a press release published today, the CMA stated that, if completed, the deal could result in “higher prices, fewer choices, or less innovation” for consumers in the country, primarily due to Microsoft’s interests in cloud gaming.

According to the document, the CMA found that Microsoft (MSFT) controls nearly 70% of the cloud gaming market. For the company to keep strengthening its competitive position, it needs to provide consumers with access to the most popular titles out there.

“The CMA provisionally found that 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 stated.

Why is the CMA Concerned About the Microsoft-Activision Merger?

With the acquisition of Activision-Blizzard, Microsoft will get its hands on some of the world’s most popular videogames such as Call of Duty, Diablo, and World of Warcraft. Once secured, the company could restrict users’ access to these titles to cloud-only and offer disadvantageous agreements to competing distribution channels such as traditional consoles.

These competitors would still be able to offer the games but the conditions will not be as good as those offered by Microsoft via its cloud gaming platform, meaning that consumers will be economically forced to use the company’s solutions and will see their choices limited as a result of this practice.

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The CMA also noted that Microsoft has acquired videogame developers in the past and has made their titles available for its consoles only so users who enjoy these games can only play them by buying an Xbox.

“Xbox and PlayStation compete closely with each other at present and access to the most important content, like CoD, is an important part of that competition. Reducing this competition between Microsoft and Sony could result in all gamers seeing higher prices, reduced range, lower quality, and worse service in gaming consoles over time”, the CMA panel asserted.

The CMA Suggests that Microsoft Should Spin Off and Sell Call of Duty

The CMA has suggested some possible remedies that Microsoft and Activision can implement to prevent the above-mentioned situations from happening. First, the regulator suggests that Microsoft could make Call of Duty a standalone enterprise and sell it to a third party.

Moreover, the company could also separate Activision from Blizzard and sell the standalone company that develops Call of Duty to a third party as well. Finally, Microsoft could opt to sell both Activision and Blizzard’s interests in Call of Duty and World of Warcraft – among other top video gaming titles.

At this point in the investigation, the CMA does not believe that behavioral remedies can be considered, such as a commitment from Microsoft not to restrict access or impose disadvantageous conditions on competitors.

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In this regard, the CMA emphasized that “behavioural remedies are less likely to have an effective impact on the SLC and its resulting adverse effects, and are more likely to create significant costly distortions in market outcomes”.

However, the panel is open to hear possible behavioural solutions from the companies that mitigate the risks mentioned by the regulator.

This means that Microsoft has the alternative to either implement one of the remedies suggested by the panel or face a straightforward prohibition of the merger in the United Kingdom.

The parties involved can submit their responses to the regulator before 1 March and a list of other suggestions that could remediate the objections set forth by this preliminary report before 22 February. Meanwhile, the final report from the CMA about the Microsoft-Activision deal is expected to be published in 26 April 2023.

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