The Competition and Markets Authority (CMA)’s provisional findings from Phase 2 of its inquiry into Microsoft’s proposed acquisition of Activision Blizzard have now been published. The UK regulatory body has identified a risk of substantial lessening of competition (SLC) if the deal goes through, and has suggested remedies that propose the divestiture of the Call of Duty business or large parts of Activision Blizzard. Microsoft has issued a response, once again assuring its commitment to address the CMA’s concerns and ensure equal access to Call of Duty on all platforms.
After expressing concerns regarding the anticompetitive potential of the acquisition, the UK’s CMA regulatory body began Phase 2 of its review of the Microsoft-Activision deal in October last year. It has now published its provisional findings from the review, which identify a potential “a substantial lessening of competition (SLC) in gaming consoles and cloud gaming services in the UK” should the deal go through.
As a result of our investigation and our assessment, we have provisionally concluded that the anticipated acquisition by Microsoft of Activision would result in the creation of a relevant merger situation. We have also provisionally concluded that the Merger may be expected to result in an SLC:
- in the supply of console gaming in the UK due to vertical effects resulting from input foreclosure; and
- in the supply of cloud gaming services in the UK due to vertical effects resulting from input foreclosure.
The CMA has cited the Call of Duty franchise’s business and the effects of foreclosing access to the franchise on rival consoles and cloud gaming services as a particular area of concern. Consequently, it has proposed the following structural remedies:
(a) Requiring a partial divestiture of Activision Blizzard, Inc. This may be:
- Divestiture of the business associated with Call of Duty;
- Divestiture of the Activision segment of Activision Blizzard, Inc. (the Activision segment), which would include the business associated with Call of Duty;
- Divestiture of the Activision segment and the Blizzard segment (the Blizzard segment) of Activision Blizzard, Inc., which would include the business associated with Call of Duty and World of Warcraft, among other titles.
(b) Prohibition of the merger.
In response, Microsoft has published a statement reaffirming its commitment to cooperate with the CMA and address its concerns, and to ensure equal access to Call of Duty on all platforms and services:
“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 UK gaming. When we say equal, we mean equal. 10 years of parity. On content. On pricing. On features. On quality. On playability.”
The CMA has invited comments on its proposed remedies to be submitted by February 22, and asks all interested parties to make representations on its provisional findings by no later than March 1. The report and proposed remedies can be read in their entirety here.