UK Warns Call of Duty May Be Sold to Get Microsoft Deal Nod (4)

Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc. will harm competition in the UK gaming market, Britain’s antitrust watchdog provisionally warned, saying it could force the selloff of the blockbuster Call of Duty franchise.

The Competition and Markets Authority said it took an initial view that the deal could result in a substantial lessening in competition, higher prices, fewer choices or less innovation for UK gamers, according to a statement published Wednesday.

The provisional view throws into question the viability of the deal that’s already under attack from the US regulator over fears Microsoft could make it harder for rival platforms to access Activision’s most popular titles.

Microsoft gained 3% to $275.51 at 9:35 a.m. New York time. Activision was down 2.7% at $73.60.

What’s clear is how valuable Call of Duty is to the deal, it was the only thing that shielded Activision from a woeful set of gaming results this past quarter. The latest installment of the series, Modern Warfare II, topped $1 billion in sales in 10 days in October and was the best-selling game of 2022.

The British agency suggested a number of structural remedies that include the divestiture of the business associated with Call of Duty, the Activision part of the business or blocking the merger altogether. The CMA also said it would consider a behavioral remedies that would promise rivals can access to Call of Duty, although it flagged concerns about its ability to manage these.

The CMA has asked Microsoft to respond to how it can address their concerns by Feb. 22. A statutory deadline for the CMA to publish a final report is set for April 26, although the agency previously said it hoped to complete the investigation in advance of that date.

Read More: Game Over or Game On? Microsoft’s $69 Billion Deal Faces UK Test

“Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation. We have provisionally found that this may be the case here,” Martin Coleman, chair of the independent panel of experts conducting this Phase 2 investigation, said.

The US Federal Trade Commission filed a lawsuit to block the takeover in December and has scheduled an in-house trial for August. The European Commission will make a decision on its in-depth review by April 11 and is expected to issue a statement of objections, setting out potential reasons for blocking the deal if no remedies are forthcoming.

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“We are committed to offering effective and easily enforceable solutions that address the CMA’s concerns,” Rima Alaily, Microsoft’s corporate vice president and deputy general counsel, said. “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.”

The UK watchdog’s probe has focused on whether the deal will allow Microsoft to foreclose on rival console gaming platforms and cloud gaming service providers.

“Steps from the EC and CMA are a normal part of their evaluation process. It opens the door to discuss various commitments Microsoft can make to assuage concerns as part of the ongoing dialog and engagement with regulators,” Bobby Kotick, chief executive officer of Activision, said in an email to employees seen by Bloomberg.

Competitor Sony Group Corp has been a vocal opponent of the deal and said it “is a game-changer that poses a threat to an industry,” in response to the CMA’s probe. It’s also objected in the US and EU investigations. Sony also highlighted its worries on the future impact on the nascent cloud gaming industry.

A spokesperson for Sony did not immediately respond to a request for comment.

(Updates throughout)

--With assistance from Lynn Doan and Cecilia D’Anastasio.

To contact the reporter on this story:
Katharine Gemmell in London at kgemmell2@bloomberg.net

To contact the editors responsible for this story:
Jeremy Hodges at jhodges17@bloomberg.net

Hugo Miller, Jonathan Browning

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