Microsoft-Activision Buyout Will “Not Result in a Substantial Lessening of Competition,” Says CMA

Story Highlights

• CMA has recently issued a provisional update, saying that Microsoft's acquisition of Activision will "not result in a substantial lessening of competition."
• As per the group, the console market will not be harmed if Microsoft acquires Activision. The deal could likely be approved by CMA.
• CMA was initially concerned with Microsoft's possibly locking Call of Duty and other IPs as exclusive, but the latest evidence suggests that it will not be financially profitable.
• UK's regulator is still studying the impacts of the merger on the Cloud gaming market, and the final report will be revealed on April 26th, 2023.

The well-renowned Microsoft's Activision Blizzard acquisition could be on its way for approval in the UK. In the latest report, UK's Competition and Markets Authority suggests that the prominent merger will not harm the console market in any way. The provisional update by the United Kingdom's legislator elaborates that the buyout "will not result in a substantial lessening of competition," as critics of the deal, namely Sony earlier argued.

Having considered the additional evidence provided, we have now provisionally concluded that the merger will not result in a substantial lessening of competition in console gaming services because the cost to Microsoft of withholding Call of Duty from PlayStation would outweigh any gains from taking such action," said the new report.

The CMA was initially warier of the nearly $70 billion deal and argued that Microsoft was planning to take Call of Duty and other IPs off Sony's console. Regardless, new findings by the UK group have noted that it will not be financially profitable to Microsoft. It sheds more light on the company's financial incentives to make Activision's games Xbox exclusive.

While the CMA's original analysis indicated that this strategy would be profitable under most scenarios, new data (which provides better insight into the actual purchasing behaviour of CoD gamers) indicates that this strategy would be significantly loss-making under any plausible scenario," states the report.

It has been the largest concern by Sony in the ongoing battle and the reason for barring the deal from going through. The UK's regulator argues that the company would avoid locking games to Xbox only because of financial reasons, and Call of Duty will stay on Sony's PlayStation consoles.

On this basis, the updated analysis now shows that it would not be commercially beneficial to Microsoft to make CoD exclusive to Xbox following the deal, but that Microsoft will instead still have the incentive to continue to make the game available on PlayStation," CMA further added.

Microsoft has not yet won the approval of the UK, and the findings may swing back toward Sony's favor. The provisional update is only related to the console market, and the Competition and Markets Authority is still studying the impact of the significant acquisition on the Cloud gaming market. The final report by CMA will be released on April 26th, 2023, when it will have studied all the impacts of the merger on the gaming industry.

Nevertheless, the provisional update is still a major advancement for Microsoft's acquisition of Activision. The update distills the accusations of anti-competitiveness by Sony and increases the chances of approval in the United Kingdom. The public response is also quite positive; in the past, a public survey that collected 2100 responses by the CMA recorded a notable amount of 75% of votes standing in favor of the buyout.

However, Microsoft is still fighting for approvals in various major regions of the world. It has gained the consent of countries, including Brazil, Saudi Arabia, Serbia, and recently Chile so far. The final decision to lock the fate of the deal is in the pending process in most major regions, namely the United States, the EU, the UK, and others. Regardless, the deal could be approved in the UK if CMA does not move in favor of Sony in the final report.

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