Britain’s competition watchdog has threatened to block Microsoft’s $69bn (£57bn) merger with Activision Blizzard or force the PC maker to sell the top-performing video game involved in the deal.
The Competition and Markets Authority (CMA) said it is considering ordering the “divestiture of the business associated with Call of Duty” following an in-depth review of the deal.
Activision’s Call of Duty, in which players take control of soldiers in war zones around the world, is one of the most popular video games in the world. The various titles have sold more than 400 million copies worldwide.
The CMA said Microsoft could be incentivized to make Call of Duty exclusive to its Xbox consoles, shutting out rival Sony’s Playstation, reducing competition and potentially driving up prices for gamers. The availability of exclusive games can encourage players to switch between consoles and is seen as crucial to boosting sales.
Martin Coleman, chair of the CMA investigation into the deal, said: “It is our job to ensure that UK gamers don’t get caught in the crossfire of global deals that over time could hurt competition and result in higher prices, fewer choices, or less innovation, we have tentatively found that this may be the case here.”
The decision is a major blow to Microsoft, given Call of Duty’s crown jewel status to Activision Blizzard. The American company also owns titles including the online fantasy game World of Warcraft and the mobile game Candy Crush.
Executives at Activision Blizzard have warned that attempting to block the deal would undermine Rishi Sunak and Jeremy Hunt’s hopes of challenging Silicon Valley dominance.
Bobby Kotick, the company’s CEO, told CNBC, “If a deal like this doesn’t go through, it won’t be Silicon Valley, it’ll be Death Valley.”
The CMA threatened to block the deal altogether unless Microsoft agrees to sell Call of Duty or other key parts of the company as part of the merger. The regulator said it would make a final decision in April.
The merger was met with opposition from Playstation maker Sony, who claimed Microsoft could use the deal to limit access to future Call of Duty games.
The CMA also said it was concerned about Microsoft’s growing control of “cloud gaming,” where consumers can play games without being tied to a particular console. Microsoft has emerged as a leader in cloud gaming and could make the game exclusive to its own online Xbox gaming hub, the regulator claimed.
The watchdog is expected to explore “behavioural” remedies in addition to potential divestments. This could force Microsoft to agree to keep its game open to rivals. Microsoft has maintained it would have no motivation to block Sony’s access to the game, which would reduce sales of the series.
Rima Alaily, Microsoft’s deputy general counsel, said the company had offered “100% equal access” to the franchise to its main gaming rivals. This includes 10 years of equal treatment of new game releases, prizes and in-game features.
An Activision Blizzard spokesperson said, “We hope that between now and April, we can help the CMA better understand our industry.”
Video game sales are worth £5 billion a year in the UK alone. The entire sector is worth more than the film and music industries combined.
Britain’s competition watchdog has taken an increasingly aggressive approach to big technology deals amid concerns about the growing clout of tech giants such as Google and Meta.
The Microsoft deal faces other investigations in Europe and a legal challenge from US regulators. In a memo to staff, Mr Kotick added that he was “convinced that the law – and the facts – are on our side”.