Microsoft’s Activision Blizzard acquisition just hit another hurdle in the U.K.

By Cristina Alexander September 1, 2022

Microsoft’s nearly $70 billion acquisition of Activision Blizzard is under review internationally, and no country takes this matter more seriously than the United Kingdom. The Competition and Markets Authority (CMA) completed the first phase of its investigation into the deal and is now recommending putting it through a second phase.

The call for extra scrutiny into the deal between Microsoft and Activision Blizzard stems from the CMA’s concern that such a deal may substantially stifle competition in the U.K.’s gaming market. Specifically, it’s worried that if and when the merger goes through, Microsoft may make Activision Blizzard’s portfolio of games exclusive to Xbox consoles, or make them available on PlayStation and Nintendo systems “on worse terms.” It’s also concerned that the company may leverage Activision Blizzard’s games across console, PC, and cloud systems to harm competition in the growing cloud gaming space.

The CMA is giving Microsoft and Activision Blizzard five business days to submit proposals that will address its anti-competition concerns. Otherwise, it will hire an independent panel to review the merger in more depth.

“Following our Phase 1 investigation, we are concerned that Microsoft could use its control over popular games like Call of Duty and World of Warcraft post-merger to harm rivals, including recent and future rivals in multi-game subscription services and cloud gaming,” said Sorcha O’Carroll, senior director of mergers at the CMA. “If our current concerns are not addressed, we plan to explore this deal in an in-depth Phase 2 investigation to reach a decision that works in the interests of UK gamers and businesses.”

Xbox head Phil Spencer shared a statement in a blog post explaining Microsoft’s view on the Activision Blizzard deal. He explained that the merger will help expand gameplay choices to players through Xbox Game Pass and extend the availability of games to mobile through cloud streaming technology. Spencer also reaffirmed Microsoft’s promise that Call of Duty will remain multiplatform.

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Cristina Alexander

Gaming/Mobile Writer

Cristina Alexander has been writing since 2014, from opining about pop culture on her personal blog in college to reporting…

Gaming

Microsoft’s Activision Blizzard acquisition blocked in the U.K. over cloud concerns

microsoft activision blizzard deal questions overwatch 2 lucio

The U.K.'s Competition and Markets Authority (CMA) has blocked Microsoft's attempt to acquire Activision Blizzard because of its potential negative impact on cloud gaming.
Since January 2022, Xbox parent company Microsoft has been trying to acquire Activision Blizzard, the video game publisher behind franchises like Call of Duty, Diablo, Warcraft, and Overwatch. The companies have run into lots of regulatory hurdles, though, especially from the CMA and FTC, the latter of which is currently suing Microsoft. While it seemed like the CMA was inching towards approving the deal, the U.K. regulator ultimately decided to block it due to its potential impact on the fledgling cloud gaming market.

"Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service," a press release from the CMA explains. " Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities."
Over the past couple of months, Microsoft has attempted to ease these cloud gaming concerns by making deals with companies like Nvidia and EE. The CMA did not think these remedies were enough, though, saying that Microsoft's efforts didn't account for enough potential business models, cloud gaming services that don't use Windows, and how the deal could take "the dynamism and creativity of competition" away from the U.K.'s cloud gaming market.
Obviously, Activision Blizzard and Microsoft aren't too happy about this decision. Activision Blizzard directly attacks the CMA in a statement provided to Digital Trends, saying that the "report contradicts the ambitions of the U.K. to become an attractive country to build technology businesses," before calling the country's economic prospects "dire" and threatening that it will reconsider its plans for growth in that country.
Microsoft's statement from Vice Chair and President Brad Smith is a bit more measured, saying that Microsoft is "fully committed to this acquisition and will appeal." Citing the deals the company has already made to bring Call of Duty to more platforms, Smith says that the decision shows "a flawed understanding of this market and the way the relevant cloud technology actually works."
https://twitter.com/BradSmi/status/1651182266406584320
Microsoft has a lot of work cut out for itself if it still wants to force this deal through after pressure from the FTC and CMA. As the appeals process could take up to nine months or more, it seems unlikely that the acquisition meets its original June 2023 deadline; it's probable we'll be following this fight to acquire Activision Blizzard for the rest of the year.

Gaming

U.K. wants Call of Duty removed from Microsoft’s Activision acquisition

Call of Duty Modern Warfare 2.

Microsoft has hit a major roadblock in its attempt to acquire Activision Blizzard, as the UK's Competition and Markets Authority (CMA) has determined that the deal "could harm U.K. gamers." For the deal to go through, the CWA is suggesting some major concessions, like Activision Blizzard divesting in the Call of Duty or Activision segments of its business ahead of the acquisition.
A notice of possible remedies document asks Activision Blizzard to do one of the following three things if it doesn't want the acquisition to be potentially prohibited.

"Divestiture of the business associated with Call of Duty."
"Divestiture of the Activision segment of Activision Blizzard, Inc., which would include the business associated with Call of Duty."
"Divestiture of the Activision segment and the Blizzard segment of Activision Blizzard Inc., which would include the business associated with Call of Duty and World of Warcraft, among other titles."

Gaming

FTC files lawsuit to block Microsoft’s Activision Blizzard acquisition

Lilith appears in a Church in Diablo 4.

The Federal Trade Commission (FTC) will sue Microsoft to block its acquisition of Call of Duty and World of Warcraft publisher Activision Blizzard.
A 3-to-1 vote ultimately determined the FTC's decision to issue the lawsuit as the commission fears that the deal would give Microsoft an unfair advantage in the gaming industry and hurt innovation. FTC Bureau of Competition Director Holly Vedova explained the FTC's intent in a press release.
"Microsoft has already shown that it can and will withhold content from its gaming rivals," she said. "Today, we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets."
That press release also highlights the FTC's belief that Microsoft's acquisition of ZeniMax Media is problematic due to a track record of "using valuable gaming content to suppress competition from rival consoles." In addition, after the Activision Blizzard acquisition, Microsoft could potentially "harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely."
This $69 billion acquisition has dominated gaming industry headlines all year as Microsoft has been doing all it can to make the deal seem favorable to the industry. As recently as December 6, Head of Xbox Phil Spencer emphasized the potential positives of this acquisition, confirming plans to continue to bring Call of Duty to Nintendo platforms and Steam for 10 years if the Activision Blizzard merger is complete.
By filing this complaint, the FTC begins proceedings that will result in a hearing and trial before an administrative law judge to determine whether or not Microsoft will acquire Activision Blizzard.