Microsoft Activision deal could lessen competition, UK watchdog finds

Microsoft's plan to buy Activision Blizzard could substantially lessen competition in consoles, multi-game subscription services and game streaming, a UK watchdog has said.

Microsoft wants to buy the maker of Overwatch, Candy Crush and Call of Duty for $68.7bn (£59.2bn).

But the UK's Competition and Markets Authority (CMA) says its concerns mean it may now carry out an in-depth probe.

Microsoft said it was ready to work with the CMA on the "next steps".

If the deal goes through it will be the Xbox maker's largest ever acquisition.

The games Activision Blizzard make are some of the most popular in the world. But it has previously faced accusations of permitting a toxic and sexist work-place culture.

In its ruling, the CMA said that it was concerned that if Microsoft bought Activision Blizzard it could harm rivals, "by refusing them access to Activision Blizzard games or providing access on much worse terms".

Sorcha O'Carroll, senior director of mergers at the CMA, said: "Microsoft could use its control over popular games like Call of Duty and World of Warcraft post-merger to harm rivals.

"If our current concerns are not addressed, we plan to explore this deal in an in-depth Phase 2 investigation to reach a decision that works in the interests of UK gamers and businesses."

This decision marks the end of the CMA's initial investigation, Phase 1 as it is called. At Phase 2, the CMA appoints an independent panel to examine the deal in more depth.

If after that CMA finds that a merger is problematic it will take steps to remedy its bad effects. That could mean stopping the merger, or allowing it to proceed but only if certain conditions are met.

In response to the news Microsoft President Brad Smith said in a statement, "We're ready to work with the CMA on next steps and address any of its concerns. 

"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. We want people to have more access to games, not less." 

Microsoft maintains that its principal interest in the planned acquisition is Activision Blizzard's expertise in mobile gaming.

The firm's head of gaming, Phil Spencer, told Bloomberg that "the biggest gaming platform on the planet is mobile phones" an area in which Microsoft lacked expertise.

Currently Activision games can be played on both Xbox and rival PlayStation consoles, but the proposed takeover have led some to speculate that more games might become Xbox exclusives.

This is something Mr Smith previously denied in an interview with CNBC, telling the network that "Great titles like Call of Duty... will continue to be available on the Sony PlayStation".

He drew parallels with the firm's 2014 acquisition of Minecraft where he said the company had invested in the game and brought it to more platforms.

The point was reiterated in a blog post by Phil Spencer published on Thursday.

Microsoft's proposed acquisition of Activision Blizzard, an eye watering deal worth almost $70bn, shook the games industry.

These two are both absolute giants, and their merger would make them a behemoth.

The US tech giant, which owns Xbox, has aggressive gaming ambitions and deep pockets. It owns 23 games studios, including Minecraft maker Mojang, and Bethesda, creator of Fallout and SkyRim.

Activision Blizzard's greatest hits include Call of Duty, Overwatch, Skylander and Diablo.

Sony - owner of the world's best-selling games console, the PlayStation - has said publicly that it "expects" Microsoft to keep these enormous titles multi-platform.

But Microsoft's Phil Spencer says what he's really interested in now is the mobile gaming market, and Activision also happens to own Candy Crush Saga - a simple, ten year old game which remains one of the most popular mobile games of all time.

It's no wonder that the competition regulators are now putting this deal even further under the microscope. They need to be certain that a merger of this size won't completely crush the market.

Other countries, in addition to the UK, are carrying out their own anti-trust investigations - and last month Saudi Arabia became the first to approve the deal.

Some have pointed to previous takeovers for evidence that the deal might lead to more new Activision Blizzard games becoming exclusive to Microsoft owned platforms.

Last year, Microsoft successfully purchased the parent company of Fallout maker Bethesda Softworks for $7.5bn (£6.46bn).

At the time the Mr Spencer said, "some new titles in the future that will be exclusive to Xbox and PC players".

And in a tweet Xbox's Aaron Greenberg confirmed that Starfield, a game announced by Bethseda three years prior to the purchase in 2018, will not be released on PlayStation.

Some independent game-makers have also been worried they might be marginalised in Microsoft's Netflix-like game subscription service Game Pass if the deal went through, and the firm began favouring its own titles.

But Sony, which makes PlayStation, has also been acquiring studios, purchasing game-maker Bungie for $3.7bn in June.