The competition regulator has referred Microsoft’s $68.7bn snap up of Call of Duty maker Activision Blizzard for an in-depth investigation, spelling danger for the gaming sector’s monster deal.
The Competition and Markets Authority (CMA) said it has referred the takeover for a ‘phase two’ probe after Microsoft said it would not be offering any proposals to address the regulator’s concerns.
Phase two investigations allow an independent panel of experts to look in more depth at the risks identified in phase one.
The watchdog flagged concerns over the all-cash deal earlier this month, stating that if Microsoft successfully buys the video game developer it could “harm rivals”, including recent and future entrants into market, “refusing them access to Activision Blizzard games or providing access on much worse terms”.
The concern from the CMA is that the Silicon Valley giant could leverage its purchase of the gaming firm and dominate the console, cloud, and PC operating systems space.
Microsoft already has a leading gaming console, Xbox, a cloud platform with Azure, and the PC operating system with Windows OS, all of which could be important to its success in cloud gaming.
The Activision deal, which was announced on January 18, includes iconic franchises, including Warcraft and Candy Crush, as well as its global eSports activities through Major League Gaming.
If the deal is a success, it would make Microsoft the third-largest gaming company by revenue, just behind Tencent and Sony.
Head of TMT Research at Mirabaud Neil Campling told City A.M. that is therefore no surprise that there is a full scale investigation coming, especially given the immense size of Microsoft.
TMT analyst at PP Foresight Paolo Pescatore said that the case was “further compounded by the ongoing probing of big tech companies given their increasing dominance.”
The CMA said today that it has given the two firms five working days to submit proposals to address its concerns or the deal would be referred for a more detailed phase two probe.
It is understood that the companies are in talks with regulators in Brussels over the competition concerns.
Microsoft President and Vice Chair Brad Smith said the company was ready to work with the CMA on next steps and address any of its concerns. He said: “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.”
Activision Blizzard were not immediately available to comment.