Microsoft slammed Sony and UK regulators amid a challenge to its proposed acquisition of Activision Blizzard, saying the UK has relied too much on Sony’s “self-serving” arguments.
The UK Competition & Markets Authority (CMA) last month referred the $68.7 billion deal to a Phase 2 investigation, which could result in the merger being prohibited or a requirement to sell some parts of the business. The CMA today released the full text of its referral decision, and Microsoft provided Ars with the executive summary of its latest response to the regulatory agency.
Sony has argued that Microsoft could pull Call of Duty from PlayStation, saying Microsoft’s offer to keep the Activision Blizzard game series on PlayStation for at least another three years beyond the current agreement is inadequate.
In its filing with UK regulators, Microsoft said PlayStation “has been the largest console platform for over 20 years” and that it’s “not credible” to suggest “that the incumbent market leader, with clear and enduring market power, could be foreclosed by the third largest provider as a result of losing access to one title.” Microsoft continued in its response to the CMA:
In short, Sony is not vulnerable to a hypothetical foreclosure strategy, and the Referral Decision incorrectly relies on self-serving statements by Sony which significantly exaggerate the importance of Call of Duty to it and neglect to account for Sony’s clear ability to competitively respond. The CMA’s assessment of this theory ignores its acknowledgement in the Referral Decision that the gaming industry is “dynamic.” While Sony may not welcome increased competition, it has the ability to adapt and compete. Gamers will ultimately benefit from this increased competition and choice.
Microsoft: Call of Duty concerns overblown
Microsoft submitted its full response to the CMA’s Phase 1 analysis this week. The full document isn’t public yet, but Microsoft made the executive summary public today.
“The CMA’s theories of harm relate to one overarching concern: that Activision Blizzard’s game catalogue—in particular the Call of Duty franchise—will enable Xbox to foreclose its competitors in gaming markets. This concern is misplaced,” Microsoft’s response said. “The Referral Decision fails to recognize the incredible array of popular and diverse gaming content that is available to market participants and overstates the importance of Activision Blizzard’s content to competition in gaming.”
Microsoft said it “plans to make the Call of Duty franchise available to more gamers in more ways than would have been the case in the counterfactual.” The company also said that Sony wields its own market power by “increasing prices of its consoles without fear of losing market share.”
Microsoft further pointed to Sony’s own recent acquisitions of game studios, including Destiny 2-maker Bungie. Sony also has minority stakes in Elden Ring-maker From Software and Epic Games. “There were over 280 exclusive first- and third-party titles on PlayStation in 2021, nearly five times as many as on Xbox,” Microsoft said.
We contacted Sony today and will update this article if we get a response.