Microsoft’s plans to purchase Activision Blizzard are facing pushback, with the UK’s Competition and Markets Authority (CMA) challenging the deal.
Microsoft announced its plans to purchase Activision Blizzard in early January for a whopping $68.7 billion, making it one of the biggest tech deals in history. Microsoft has been purchasing game studios as a way to help it compete in the burgeoning metaverse. Since Microsoft is one of the top three console makers, however, the CMA has concerns the purchase could harm competition and consumers, concerns it outlined in a press release:
The CMA has also received evidence about the potential impact of combining Activision Blizzard with Microsoft’s broader ecosystem. Microsoft already has a leading gaming console (Xbox), a leading cloud platform (Azure), and the leading PC operating system (Windows OS), all of which could be important to its success in cloud gaming. The CMA is concerned that Microsoft could leverage Activision Blizzard’s games together with Microsoft’s strength across console, cloud, and PC operating systems to damage competition in the nascent market for cloud gaming services.
The CMA’s investigation has been a Phase 1 investigation until now. After discovering valid reasons for concern, the investigation will move to Phase 2:
At Phase 2, the CMA appoints an independent panel to examine the deal in more depth and evaluate whether it is more likely than not that a substantial lessening of competition will occur as a result of the merger – a higher threshold than Phase 1. It typically builds on the work and evidence from Phase 1 with more third-party engagement via requests for information and use of its statutory powers in gathering internal documents. At Phase 2, the CMA will also carry out further in-depth review of the merging parties’ internal documents which show how they view competition and the market.
The CMA first announced its investigation in early July, just weeks after US senators asked the Federal Trade Commission (FTC) to more thoroughly investigate the proposed merger, building on a review the FTC announced in February.
Legislators and regulators around the world have been cracking down on Big Tech acquisitions and mergers. If the US or the UK torpedo the Microsoft/Activision deal, it will send a clear signal to tech companies about the current state of affairs.