This news comes as a surprise to many, as the CMA had only handled a handful of antitrust investigations throughout the years and was relatively unfamiliar with video game industry dynamics. However, in its decision letter, the CMA makes it clear that it does not believe that an Activision-Microsoft merger would be in the best interests of consumers or competition.
The combined market share of Microsoft and Activision games would be too much for other console game companies to compete with. Each company is known for its own unique gaming franchises, which would be hard to transfer to another platform. Furthermore, Microsoft may withhold certain games from competing platforms in order to maintain their dominance. With the increasing shift towards digital downloads and streaming services, this could ultimately harm the video game industry as a whole.
The story so far
With the acquisition of Activision, Microsoft is hoping to tap into the lucrative gaming market and solidify its foothold in a growing industry. In addition, this move could help Microsoft compete against giants such as Tencent and Sony. With Call of Duty alone raking in revenues of over $15 billion annually, this acquisition marks a major victory for the Redmond-based company.
The CMA’s antitrust investigation into the Xbox One and One S console deal has been narrowed, focusing on cloud gaming. This move likely signals that the regulator is gearing up to block the merger, which would create higher prices, fewer choices, and less innovation for UK gamers.
For people who love the outdoors, nothing is more fulfilling than camping in a beautiful spot where you can enjoy a peaceful night under the stars
The CMA has received a significant amount of new evidence in response to its original provisional findings. Having considered this new evidence carefully, together with the wide range of information gathered before those provisional findings were issued, the CMA inquiry group has updated its provisional findings and reached the provisional conclusion that, overall, the transaction will not result in a substantial lessening of competition in relation to console gaming in the UK.
This updated provisional finding by the CMA confirms that Microsoft’s acquisition of Forza Horizon 3 developer Playground Games will not have a substantial effect on competition in the console gaming market in the UK. Although some smaller studios may be concerned about potential increased competition from larger companies like Microsoft, this purchase will most likely result in an overall increase in quality and diversity of console games, making it more difficult for any individual company to gain a monopoly on the console gaming market.
Appeal
Brad Smith, Microsoft’s vice chair and president issued a statement immediately following the CMA’s decision to uphold the initial European Commission ruling against Microsoft. The statements reads that Microsoft intends to appeal the decision while pointing to recent moves it has made to alleviate competition concerns, including signing agreements that would make Activision Blizzard games available on rival devices.
We remain fully committed to this acquisition and will appeal. The CMA’’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom.
We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies.
We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.
-Brad Smith, Vice Chair and President
The CMA’s decision to reject the merger will prevent both businesses from competing more effectively and may dissuade technological innovation and investment in the United Kingdom. The decision could have far-reaching consequences for the economy as a whole, especially if other companies begin to feel constrained by Comcast’s significant reach.
Activision Blizzard continues to sign contracts with mobile phone and tablet providers worldwide, reinforcing agreements made earlier this year. These 150 million new devices will make Activision Blizzard’s popular games available to even more people around the world. The company is committed to regulatory remedies in order to ensure that its games are accessible to everyone, regardless of their location or device choice.
The decision by Microsoft to pull its services from the AWS cloud comes as a surprise, given that Microsoft has invested heavily in heavy use of AWS over the past several years. While it is commendable that Microsoft is taking steps to better understand how its own technology works within the cloud, it is troubling that this deliberation appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.
As Vice Chair and President of the PCAST, I feel privileged to work alongside so many talented and committed individuals. Our dedication to promoting citizen engagement is evident in everything we do, from
This dispute between Microsoft and the CMA essentially centers around whether or not Microsoft’s proposed agreements would be enough to ensure that Activision games remain available on competing platforms for a decade. The CMA has taken the position that they can’t replace the existing competitive dynamism, and that these agreements would merely compensate for the loss of competition through obligations that would regulate Microsoft’s behavior. It remains to be seen how this dispute will develop, as both sides have made various commitments toward keeping their respective games platforms accessible.
The CMA is the largest trade association in the United States representing the interests of music and recording artists. Form
We had to consider how best to remedy these concerns. Preventing the merger would preserve the competitive dynamism and level of innovation that exists in the growing cloud gaming market. In contrast, Microsoft proposed a remedy that sought to compensate for the loss of competition with a set of obligations that would regulate its behaviour and how it did business for a period of ten years.
Having carefully considered Microsoft’s proposal, we found that it would not restore the competitive dynamism that would be lost as a result of the Merger. We decided, therefore, that a remedy that preserves competition, rather than one that imposes global regulatory oversight, is the only effective and proportionate way forward.
One proposal to remedy the concerns of the smaller companies was to prevent the merger from taking place. This would preserve and promote competition in the cloud gaming market, which could lead to new innovations and better prices for gamers. In contrast, Microsoft proposed a set of obligations that it would have to follow for a period of ten years in order compensate for the loss of competition. These rules would regulate how Microsoft does business, ranging from its advertising practices to what types of software it releases. Both proposals have their pros and cons, but we believe that preserving competitive dynamism is more important than caving into Microsoft’s demands.
Based on the text, we believe that Microsoft’s proposal would not restore the competitive dynamism that would be lost as a result of the proposed merger. We have decided, therefore, to pursue a remedy that preserves competition rather than one that imposes global regulatory oversight. This will help ensure a level playing field for both companies and will benefit consumers as well.
Microsoft’s decision to appeal the CMA’s unfavorable ruling on the Xbox One could have far-reaching implications for the future of video gaming in Great Britain. The CMA determined that the Xbox One launched at an unacceptably high price, and did not provide enough value for customers who had already devoted considerable sums of money to Microsoft’s previous console, the Xbox 360. This potential string of defeats could dissuade other businesses from investing in Great Britain, damaging its standing as a leading technological hub.
The U.K. spokesperson’s remarks suggest that the country is not open for business and its citizens are facing increasingly dire economic prospects. This report likely won’t sit well with global innovators, who will take note of the U.K.’s apparent lack of commitment to developing its economy.
Meanwhile, the EU is mulling over whether or not to Approve Microsoft’s $26 billion acquisition of LinkedIn. The acquisition has already been met with scrutiny in other regions, but the EU may decide that there are enough remedies offered by Microsoft to offset any potential antitrust concerns.
Microsoft has come under fire for its proposed acquisition of competitor Skype, with some arguing that the deal will tank innovation in the booming voice chat market. Critics also allege that the tech giant will use its power over Skype to gain an advantage over rivals, including voice chat app Alexa and messaging app Facebook Messenger. But while Microsoft may face some antitrust issues with the purchase, it’s largely seen as a necessary step in retaining user loyalty and expanding its reach into new markets.
