Microsoft/Activision Blizzard deal faces in-depth watchdog investigation

Microsoft’s $68.7 billion acquisition of Activision Blizzard is expected to face increased scrutiny from regulators in the UK and Brussels after the company failed to address concerns that the deal is anti-competitive and will prevent rival consoles and cloud gaming/subscription services from accessing Activision Blizzard games.

Earlier this month, the United Kingdom’s Competition and Markets Authority (CMA) wrote that the Microsoft/Activision deal could lead to competition concerns within the video game industry. The regulator said that if Microsoft didn’t submit a proposal to assuage these worries, the CMA will open an extended stage 2 phase of its probe in which the acquisition would face increased scrutiny.

According to the Financial Times, citing two individuals with knowledge of the situation, Microsoft decided not to offer any remedies to the CMA because there were no obvious commitments the UK regulator would likely accept. Only in rare circumstances will the CMA accept behavioral remedies such as promises to maintain access to a product or service at the end of a phase 1 probe.

The second phase of the CMA investigation is expected to begin this week. Microsoft could make a formal commitment to guarantee its rivals’ access to games during this more in-depth investigation stage.

Representatives from both Microsoft and Activision have been in pre-notification-stage talks with regulators in Brussels since the deal was announced in January. Regulators in other countries, including the US, Brazil, and New Zealand, are also examining the acquisition.

One of the most significant issues facing the deal is the future of the Call of Duty franchise. Xbox boss Phil Spencer said Microsoft is committed to keeping CoD on PlayStation for several more years beyond the current deal Sony has with Activision, which covers the series’ next three releases, including October’s Call of Duty: Modern Warfare II. PlayStation CEO Jim Ryan called the proposal “inadequate.”

The enormous amount of scrutiny the Microsoft/Activision deal faces over the impact it could have on the industry brings to mind Nvidia’s attempted takeover of Arm. Team green endured so many regulatory challenges during the $40 billion acquisition that it decided to walk away in February.