REG - Competition and Mkts - CMA update: Microsoft / Activision Blizzard

Activision BlizzardAnnouncement

01/09/2022 13:15

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RNS Number : 9737X  Competition and Markets Authority  01 September 2022

 

Microsoft / Activision deal could lead to competition concerns

·    Initial CMA review identifies potential concerns

·    In-depth probe needed to fully assess issues unless Microsoft and
Activision offer suitable proposals to address potential issues

The Competition and Markets Authority (CMA) is concerned that Microsoft's
anticipated purchase of Activision Blizzard could substantially lessen
competition in gaming consoles, multi-game subscription services, and cloud
gaming services (game streaming).

Microsoft is 1 of 3 large companies, together with Sony and Nintendo, that
have led the market for gaming consoles for the past 20 years with limited
entries from new rivals. Activision Blizzard has some of the world's
best-selling and most recognisable gaming franchises, such as Call of Duty and
World of Warcraft. The CMA is concerned that if Microsoft buys Activision
Blizzard it could harm rivals, including recent and future entrants into
gaming, by refusing them access to Activision Blizzard games or providing
access on much worse terms.

The CMA has also received evidence about the potential impact of combining
Activision Blizzard with Microsoft's broader ecosystem. Microsoft already has
a leading gaming console (Xbox), a leading cloud platform (Azure), and the
leading PC operating system (Windows OS), all of which could be important to
its success in cloud gaming. The CMA is concerned that Microsoft could
leverage Activision Blizzard's games together with Microsoft's strength across
console, cloud, and PC operating systems to damage competition in the nascent
market for cloud gaming services.

The CMA considers that these concerns warrant an in-depth Phase 2
investigation. Microsoft and Activision Blizzard now have 5 working days to
submit proposals to address the CMA's concerns. If suitable proposals are not
submitted, the deal will be referred for a Phase 2 investigation.

Phase 2 investigations allow an independent panel of experts to probe in more
depth the risks identified at Phase 1.

Sorcha O'Carroll, Senior Director of Mergers at the CMA, said:

"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.

"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."

At Phase 2, the CMA appoints an independent panel to examine the deal in more
depth and evaluate whether it is more likely than not that a substantial
lessening of competition will occur as a result of the merger - a higher
threshold than Phase 1. It typically builds on the work and evidence from
Phase 1 with more third-party engagement via requests for information and use
of its statutory powers in gathering internal documents. At Phase 2, the CMA
will also carry out further in-depth review of the merging parties' internal
documents which show how they view competition and the market.

For more information, visit the Microsoft / Activision case page
(https://www.gov.uk/cma-cases/microsoft-slash-activision-blizzard-merger-inquiry)
.

Notes to editors

For media enquiries, contact the CMA press office on 020 3738 6460
or press@cma.gov.uk (mailto:press@cma.gov.uk) .

Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a reference
to Phase 2 if the CMA believes that it is or may be the case that a relevant
merger situation has been created, or arrangements are in progress or
contemplation which, if carried into effect, will result in the creation of a
relevant merger situation; and the creation of that situation has resulted, or
may be expected to result, in a substantial lessening of competition with any
markets or markets in the United Kingdom for goods or services.

Microsoft is a global technology company offering a wide range of products and
services, with a global turnover of nearly £125 billion last year. Since
2001, it has sold various generations of Xbox gaming consoles. Gamers
typically download digital copies of the games they want to play on Xbox from
Microsoft's Xbox Store. Microsoft also offers a multi-game subscription
service, Xbox Game Pass, where gamers pay a monthly fee to gain access to a
library of games.

Activision Blizzard is a game developer and publisher with global turnover of
£6.3 billion last year. It develops popular gaming content for consoles, PC,
and mobile, which includes titles such as Call of Duty, World of Warcraft and
Candy Crush.

The Phase 1 investigation identified a realistic prospect of SLCs (significant
lessening of competition) in the following frames of reference in the UK:

·    gaming consoles; multi-game subscription services; and cloud gaming
services.

 

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