A Competition and Markets Authority (CMA) investigation has tentatively concluded that the proposed acquisition could lead to higher prices, less choice or less innovation for UK video game players.

In January 2022, Microsoft entered into an agreement to acquire Activision, one of the world's most popular video game publishers, in a deal worth $68.7 billion. The deal is the largest video game acquisition in history and the largest acquisition Microsoft has ever made.

The CMA is all about two things: cloud gaming and gaming exclusivity. They believe that Microsoft can gain a commercial advantage by making Activision's games available exclusively on its cloud gaming service or on unfavourable terms on other services. If Microsoft acquires Activision Blizzard, it will strengthen its strong position in cloud gaming, which the regulator estimates represents 60-70 % of global cloud gaming services. The deal could also harm UK gamers as it would weaken the important rivalry between Xbox and PlayStation gaming consoles.

The CMA has now proposed a set of possible remedies that Microsoft could take to obtain approval for the acquisition in the UK. Among them is a proposal that includes a partial divestment of the Call of Duty division. The CMA's conclusions are still tentative, but they complicate Microsoft's plans to take over Activision Blizzard. The software giant has faced scrutiny from regulators around the world, with the Federal Trade Commission (FTC) even attempting to block the deal late last year.

Among other things, the FTC took legal action in July 2022 to block Meta's acquisition of Within, developer of the popular VR app Supernatural. The FTC argued that the acquisition would further strengthen Meta's already dominant position in the consumer VR market, in which it has invested heavily in recent years. However, the court denied the FTC's request for an injunction last week (with a one-week stay to appeal). The two cases are significantly different, largely because of the smaller size of the VR market compared to the overall gaming industry, and also because the FTC's focus in Within was on VR fitness apps, not VR or games as a whole. The decision nonetheless illustrates the difficult task regulators face in curbing tech industry consolidation, despite efforts to strengthen antitrust regulations.

"As a result of industry consolidation, we have seen an increasing number of interventions by antitrust authorities in recent years to prevent global giants from gaining market dominance."

-Jan Brabec, Partner – Financial Advisory