The UK Competition and Markets Authority (CMA) partially reversed its position on Microsoft‘s proposed acquisition of Activision Blizzard late last month, concluding on the basis of new data that the transaction is unlikely to harm console gaming competition in the UK. Apparently, Sony has not taken the announcement well as revealed in its response published today, which labels CMA’s reconsideration “surprising, unprecedented, and irrational.”

• Related Reading: Microsoft-Activision Deal: Sony’s “Disappointing Behavior” Won’t Be Held Against It, Claims Bobby Kotick

Sony submitted a response to the CMA’s addendum to its provisional findings on March 31, and the document has been published today. The Japanese console manufacturer and game industry giant claims that the UK regulator contradicted its aim as stated in the original provisional findings to “assess the Merged Entity’s incentive to foreclose by considering all the available evidence in the round” by focusing on a single model when re-evaluating its conclusions. Further, while it does not contest that Microsoft would not have reason to withhold Call of Duty from PlayStation platforms post-acquisition, it claims that the addendum has not disproved that the Redmond corporation would have the ability to do so or that it could have other incentives to engage in foreclosing behavior.

Sony points out numerous alleged conceptual errors in the CMA’s revised lifetime value (LTV) model:

• The model understates Microsoft’s gains from withholding Call of Duty from PlayStation platforms by around 70% according to Sony due to the fact that it does not take into account that highly-engaged Call of Duty players generate greater revenue, and also because Microsoft’s losses will be offset by the elimination of royalty payments to Activision and by players switching over from PlayStation platforms for Call of Duty.
• The model discards Microsoft’s contemporaneous business data and instead relies on its adjusted LTV estimates that are not in line with its current business.
• The model is also erroneous in its assumption that players who do not heavily engage with Call of Duty would not switch to Xbox platforms were the franchise to be withheld from PlayStation.

It also disputes the CMA’s conclusion that the Microsoft-Activision deal is unlike Microsoft’s previous acquisitions, claiming that its now-proven withholding of ZeniMax games like Redfall from PlayStation after acquiring the company proves that it will do the same with Activision’s multi-platform franchises.

Microsoft’s proposed acquisition of Activision Blizzard remains under global regulatory review, most notably in the US, the U.K. and the EU, though the latter two appear likely to let the acquisition pass following Microsoft’s recent access agreements with Nintendo, Nvidia, Boosteroid, and Ubitus. The deadline for the CMA’s final report remains April 26, 2023.

Source: CMA