While much of the attention being paid to Microsoft this week is justifiably focused on the addition of an OpenAI-powered chatbot to its Bing search engine—check out must-read takes on that from my colleagues Alexei Oreskovic and Jeremy Kahn—there’s also action underway regarding the company’s record-breaking, $69 billion takeover of games publisher Activision Blizzard.
The U.K.’s antitrust regulator, the Competition and Markets Authority (CMA), today laid out what it sees as blockers to the deal’s completion. The CMA thinks Microsoft would unjustly benefit from being able to make Activision games exclusive to its own Game Pass cloud gaming service and would get an even stronger position in that sector, of which it already has a 60-70% market share. The watchdog also warned that Microsoft could use Call of Duty exclusivity to boost Xbox console sales and harm Sony’s rival PlayStation platform. In short, gamers would suffer from reduced competition.
So far, so familiar. This is pretty much what the U.S. Federal Trade Commission (FTC) complained about when it sued to block the deal in December, and what the European Commission reportedly laid out in a “statement of objections” (a kind of European antitrust charge sheet) a week ago.
However, the British regulator has gone a step further, by proposing potential solutions (or “remedies” in antitrust-speak) to the problems it identified. The CMA indicated it would prefer so-called structural remedies in this case, meaning a break-up. Microsoft might have to get rid of part of the Activision Blizzard business—either Call of Duty specifically, or the wider Activision unit, or the Activision and Blizzard units together (which would leave Candy Crush-maker King, along with the esports and motion-picture units.) Or, the CMA could just block the merger wholesale.
None of that sounds terribly appetizing for Microsoft. However, it would be a mistake to see today’s developments as necessarily being the death of the deal.
For one thing, remedy notices like these are supposed to be, in the CMA’s words, “a starting point for discussion” with Microsoft, Activision Blizzard, and their customers and competitors. The authority is open to comments for the next two weeks—its final decision is due late April—and it says it will opt for “the least costly and intrusive remedy that it considers to be effective.”
Neither Microsoft nor Activision Blizzard has actually proposed its own remedies, the CMA added. That’s not quite how Microsoft sees it—the tech giant has been loudly touting the fact that it’s committed to granting competitors a decade’s worth of “100% equal access” to Call of Duty titles, and today Microsoft’s deputy general counsel Rima Alaily insisted that this would “address the CMA’s concerns.”
“When we say equal, we mean equal,” Alaily said in an emailed statement. “Ten years of parity. On content. On pricing. On features. On quality. On playability.”
The British regulator is not oblivious to Microsoft’s argument and, while it doesn’t think this sort of “behavioral” commitment can be the primary solution, it said it will also consider it as “a possible remedy.” So, stay tuned.
A final word regarding Activision Blizzard CEO Bobby Kotick’s media tour just ahead of the CMA’s provisional decision: I’m not sure it’s the smartest thing to accuse the regulator you’re trying to charm of “being co-opted by the FTC ideology and not really using independent thought,” or to claim—after they’ve just spent five months polling the industry and reviewing millions of internal Microsoft and Activision documents—that they’re “confused.”
So far, the CMA is the only one of the big antitrust regulators to suggest a way through this. Especially as it’s extremely tricky to appeal a CMA divestiture decision—just ask Meta—playing nice might be the better option.
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David Meyer
Data Sheet’s daily news section was written and curated by Andrea Guzman.
