The CMA does not think that Microsoft acquiring Activision would foster healthy competition in the videogame industry.

The Competition and Markets Authority (CMA) recently stated that the Microsoft-Activision deal could harm competition in the gaming industry. According to the British antitrust regulator, Microsoft’s (NASDAQ: MSFT) $69 billion acquisition of the Santa Monica-based videogame publisher could negatively affect gaming consoles. In addition, the CMA also states that the software giant acquiring Activision (NASDAQ: ATVI) could also spell bad news for subscription services and cloud gaming. This could also happen if Microsoft refuses to allow competitors access Activision’s commercially successful staple of games, including “Call of Duty”. A statement from the CMA on the plausibly detrimental effect of the Microsoft-Activision merger on gaming competition read:

“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.”

The CMA further stated that the merger between both corporations would only serve to underscore Microsoft’s videogame dominance. The American multinational and Japanese rival Sony has ruled the console market for about twenty years now. In that time, only a few entrants have tried to eke out a market share.

Back in July, the CMA had stated that it would open a probe into Microsoft’s acquisition deal with Activision.

Analysts Touch on the Microsoft-Activision Deal with Regards to Competition

Following the latest verdict, Microsoft moved to allay monopoly concerns raised by the Competition and Markets Authority. In a statement, President and Vice Chair Brad Smith explained that they “want people to have more access to games, not less”.

Furthermore, Smith also suggested that Microsoft is open to sharing its new assets with competitors, saying:

“Sony, as the industry leader, says it is worried about ‘Call of Duty’, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation.”

Numerous analysts also concur with Microsoft’s intent to create a level playing field. According to these analysts, the likelihood of anti-competitiveness in the industry becomes moot if Microsoft follows through on this assurance. However, Atlantic Equities analyst Kunaal Malde also suggested that Microsoft should be more specific on its commitment. In addition, Malde also stated that the tech corporation should put down specifics regarding exclusivity in writing.

Microsoft stock was down 1.2% following the CMA development. Furthermore, some expectations suggest that the acquisition deal will close in Microsoft’s financial year by end-June 2023. As it stands, both companies have a September 8th deadline to properly address the CMA’s concerns. However, in a separate blog statement regarding the Activision acquisition, Microsoft said:

“We will continue to engage with regulators with a spirit of transparency and openness as they review this acquisition. We respect and welcome the hard questions that are being asked.”

The deal will require approvals from a host of regions, including the US, the European Union, and China. In addition, a previous Reuters report stated that Microsoft would pay a breakup fee of $3 billion if the deal fell through.

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