Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard ran into a potential hiccup Wednesday as the U.K.’s market watchdog unveiled "provisional findings" flagging competition-related concerns.
In a press release, the Competition and Markets Authority (CMA) voiced concerns the Microsoft-Activision Blizzard deal could significantly curb competition the Xbox-owning company "would otherwise face in the cloud gaming market in the UK." It "could harm UK gamers by weakening the important rivalry between Xbox and PlayStation gaming consoles" and bring higher prices, the regulator also said.
The CMA claimed evidence suggesting Microsoft, which owns Xbox, allegedly "would find it commercially beneficial to make Activision’s games exclusive to its own consoles" or "its own cloud gaming service." It could also make games "only available" to others like Sony’s Playstation "under materially worse conditions," the regulator alleged.
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Activision Blizzard publishes Call of Duty and World of Warcraft, among other popular games.
The provisional findings came after a five-month investigation that the CMA kicked off back in September 2022.
Microsoft Corporate Vice President and Deputy General Counsel Rima Alaily said in a statement to FOX Business the company was "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," Alaily said.
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The "100% equal," the company said, applies to content, pricing, features, quality, and playability.
"We hope between now and April we will be able to help the CMA better understand our industry to ensure they can achieve their stated mandate to promote an environment where people can be confident they are getting great choices and fair deals, where competitive, fair-dealing business can innovate and thrive, and where the whole UK economy can grow productively and sustainably," Activision Blizzard told FOX Business.
Microsoft CEO Satya Nadella and Activision Blizzard CEO Bobby Kotick have also both defended the deal, arguing it will increase competition in the industry.
A final report from the CMA is slated to come in late April, with the two companies having deadlines before then to respond.
ACTIVISION CEO ON MICROSOFT'S $68.7 BILLION DEAL: REGULATORS DON'T HAVE EXPERIENCE
Since its unveiling, the U.S. Federal Trade Commission and European Union regulators have also been looking at Microsoft’s proposed acquisition of Activision Blizzard.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said in a research note "there was already some pretty deep skepticism among shareholders about whether Microsoft’s takeover would be approved especially as multiple regulators were reviewing the transaction, given that Activision shares were trading more than 20% below Microsoft’s offer of $95 a share."
"Outwardly Microsoft says it will find solutions to the CMA’s concerns that the takeover would result in higher prices, fewer choices, and less innovation," she said. "But with the U.S. Federal Trade Commission and European Authorities also deciding on the takeover, Microsoft is likely to face an uphill battle against a regulatory steamroller which is still in first gear."
