Microsoft-Activision deal not supported by UK regulator
CMA's provisional assessment is that the acquisition would mean higher costs, fewer options or less innovation for gamers in the UK
The UK's Competition and Markets Authority (CMA) says it does not support Microsoft's $69 billion planned acquisition of games developer Activision Blizzard as the deal could reduce competition in the UK gaming market and may even force the sale of the successful Call of Duty franchise.
The completion watchdog said its initial assessment is that the acquisition would mean higher costs, fewer options or less innovation for gamers in the UK.
The British regulator's provisional findings come after a thorough investigation that lasted over five months to understand the possible impact of the deal on the market.
It concluded that it would be vital for cloud gaming providers to be able to provide popular titles in future to attract and retain users as the industry grows and develops.
The watchdog suggests that Microsoft will find it financially advantageous to make Activision's games exclusive to its own cloud gaming service. There is also a chance that the tech giant makes those games available on other services under materially worse conditions.
The CMA said that Microsoft's acquisition of one of the biggest game publishers in the world would strengthen its position and significantly lessen competition in the UK market for cloud gaming.
"This could alter the future of gaming, potentially harming UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC," it added.
The regulator said that selling or spinning off the business that produces Call of Duty, as well as the whole Activision division of the combined Activision Blizzard, were potential remedies to resolve competition issues. However, it acknowledged that a spin-off into a solo operation might leave the new company without enough assets and resources to function as an independent entity.
The CMA said a structural solution like a partial sale, spin-off, or completely blocking the deal was its preferred option, though it did not completely rule out a "behavioural remedy" like a licence to guarantee distribution of Call of Duty to Sony.
Microsoft announced plans to acquire Activision Blizzard, the publisher of Call of Duty and World of Warcraft, last year in a $68.7 billion (£50.5 billion) all-cash deal. Microsoft intends to grow its gaming business across PCs, mobile and consoles, as well as provide the building blocks for its metaverse efforts.
The Windows maker has enormous gaming budgets and aggressive ambitions. It owns 23 gaming studios, including Bethesda - creator of Fallout and Skyrim - and Mojang, the studio behind Minecraft.
Commenting on CMA's provisional finding, Rima Alaily, Microsoft corporate vice-president and deputy general counsel, said: "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."
She noted that 75% of respondents to the CMA's public consultation believe the Microsoft-Activision deal is favourable for competition in UK gaming.
Activision stated in a statement that the CMA's conclusions were preliminary and that both parties will have an opportunity to reply.
The company expressed their hope that it would be able to "help the CMA better understand our industry" between now and April so it could "achieve their stated mandate" of fostering an environment where fair-dealing companies may develop and grow.