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Regulators put the brakes on Microsoft’s Activision acquisition

An Xbox controller on a table next to a Call of Duty game.

Getty Images | Bloomberg

Microsoft’s $75 billion acquisition of video game maker Activision Blizzard faces in-depth probes in Brussels and the UK following growing concerns the deal is anti-competitive and will exclude rivals from accessing the blockbuster game Call of Duty.

It comes as the UK’s Competition and Markets Authority is expected to launch an in-depth investigation this week after Microsoft decided not to offer any remedies at this stage, according to two individuals with knowledge of the situation.

Earlier this month, the CMA became the first global antitrust regulator to sound the alarm over the transaction, giving Microsoft five days to come up with undertakings that would resolve its worries or face an extended “phase 2” probe.

The companies have already been in talks with regulators in Brussels since the deal was announced eight months ago, in what is known as the pre-notification stage—an indication of how scrupulous officials will be during the probe.

Regulators and others involved in the deal expect a prolonged EU investigation once Microsoft officially files its case in Brussels in the coming weeks. People familiar with the EU’s thinking say regulators will take their time to examine this deal because of its size, the nature of the buyer and the rising concerns from rivals, including Sony.

“It is a big deal, a difficult deal,” said a person in Brussels familiar with the transaction. “It needs an extensive investigation.”

It comes after Sony last week accused Microsoft of misleading the games industry and regulators about its commitments to keep Call of Duty on PlayStation consoles. It said Microsoft had only offered to keep releasing Activision’s hit game on PlayStation for a limited number of years.

The move by the UK lays out the issues that Microsoft will have to overcome to pull off its biggest-ever deal. The US tech giant is hoping to close the deal by the end of June next year but must first clear regulatory hurdles in countries from New Zealand to America.

Microsoft opted not to offer any remedies to the CMA at this stage because there were no obvious commitments the UK regulator would be likely to accept, according to people with knowledge of the situation.

The watchdog does not generally accept behavioral remedies, such as commitments to maintain access to a product or service, at the end of a phase 1 probe apart from in rare circumstances.

One competition lawyer with knowledge of the case said it was “almost impossible” for Microsoft to offer a remedy that would prevent the investigation moving to an in-depth antitrust probe.

The Activision deal comes at a time when regulators around the world are concerned they have not been as interventionist as they should have been with regards to previous Big Tech deals.

Gaming rivals say they fear that Microsoft will offer commitments it could easily “wriggle out of” and that are not long lasting. Sony and others want the commission to force Microsoft to offer guarantees that they will be able to access all games “on equal terms and in perpetuity.”

Microsoft has said it will continue to make Call of Duty available on other companies’ gaming consoles, such as PlayStation, rather than turning it into an exclusive title on Microsoft’s Xbox. Brad Smith, Microsoft’s president and vice-chair, had previously said “we want people to have more access to games, not less.”

The company could choose to enter a formal commitment to the CMA to guarantee its rivals’ access to games during the second phase of the investigation, when an independent panel will analyze the deal in depth and consider potential solutions to antitrust issues.

© 2022 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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