Microsoft says regulators sided with Sony on Activision Blizzard acquisition

The U.K. Competition and Market Authority recently issued a statement expressing concerns over Microsoft’s pending acquisition of Activision Blizzard, citing Microsoft’s subscription services and the increased appeal of Xbox as Call of Duty’s home as serious competitive impairments to Sony. Microsoft responded in its own statement, which GamesIndustry.biz and The Verge’s Tom Warren obtained, by downplaying its position in the games and cloud sectors, before accusing the CMA of siding with Sony and accepting the PlayStation maker’s arguments “without the appropriate level of critical review.

“The CMA is concerned that having full control over this powerful catalogue, especially in light of Microsoft’s already strong position in gaming consoles, operating systems, and cloud infrastructure, could result in Microsoft harming consumers by impairing Sony’s – Microsoft’s closest gaming rival – ability to compete as well as that of other existing rivals and potential new entrants who could otherwise bring healthy competition through innovative multi-game subscriptions and cloud gaming services,” the CMA said in its statement.

The CMA did not approve of the acquisition after its initial investigation, which means the organization will now prepare a second, more in-depth investigation into whether it believes the deal should be allowed to proceed.

Microsoft’s lengthy response included various defenses, such as saying Xbox was struggling in the console and PC gaming spaces and downplaying the significance of cloud gaming – despite creating a section of Microsoft dedicated to cloud development in 2021. 

Microsoft also argued against the idea that putting Call of Duty on its Game Pass subscription service might negatively affect Sony. The Redmond-based software developer said that Sony chose not to allow Game Pass on PlayStation and could pursue expanded subscription models of its own, but prefers to protect revenue from new game releases instead.

“Sony is not vulnerable to a hypothetical foreclosure strategy, and the Referral Decision incorrectly relies on self-serving statements by Sony which significantly exaggerate the importance of Call of Duty to it and neglect to account for Sony’s clear ability to competitively respond,” Microsoft said in its response. “While Sony may not welcome increased competition, it has the ability to adapt and compete. Gamers will ultimately benefit from this increased competition and choice.”

The CMA will issue its early findings from the second investigation in January 2023, with a full report expected by March 1, 2023.

Written by Josh Broadwell on behalf of GLHF