The UK’s Competition and Markets Authority (CMA) entered phase 2 of its investigation into the Microsoft and Activision Blizzard merger. The CMA cited several antitrust concerns that were published in October. The regulatory body was particularly worried that the deal could hamper PlayStation’s ability to compete with the Xbox console given that Microsoft would gain control of the Call of Duty franchise. Sony issued a statement expressing confidence that the state regulators will conclude that the deal would result in a considerable shrinking of the competition and should be blocked. The console maker claims that if the Microsoft acquisition pushes through, independent game developers would be affected as Xbox could increase the price of games, hardware, and subscriptions. “SIE is confident that the CMA’s Phase two inquiry will confirm that the transaction is likely to substantially lessen competition and should be prohibited,” the statement said. Sony argues that the Call of Duty franchise is irreplaceable and Microsoft’s control over the video game series would heavily favor it rendering Sony unable to compete. Microsoft recently revealed that it offered Sony a ten-year deal to keep the Call of Duty franchise on the PlayStation. Sony argues that after the deal expires, “Microsoft would have the ability and incentive to exclude or restrict rivals, including PlayStation and PlayStation Plus, from having access to Call of Duty.” Sony revealed that during the initial inquiry, the CMA collected data showing that Activision and Microsoft games account for 30-40% of all time spent playing on consoles in the UK. Sony argues that if Microsoft gains control over Activision’s content, it could potentially harm competitors and independent developers. “In the mid-term, a significant number of PlayStation users would likely switch to Xbox and/or Game Pass,” Sony said. “Faced with weaker competition, Microsoft would be able to: increase console and game prices for Xbox users (including those that switched from PlayStation); increase the price of Game Pass; and reduce innovation and quality.” “Microsoft’s foreclosure strategy would lock in many consumers to Xbox, including existing Xbox users who play Call of Duty and those switching from PlayStation to play Call of Duty. These locked-in users would become less likely to switch in response to any procompetitive actions on SIE’s part,” the statement adds. “This would effectively prevent SIE from competing for the business of a large portion of console gamers, reducing its incentives to invest.” The acquisition of Activision would allow Microsoft control over the developer’s other IPs including World of Warcraft, Diablo, Overwatch, and Crash Bandicoot. Microsoft plans to offer these games as a part of the Xbox Game Pass. According to Sony, this would tip the balance towards the Xbox Game Pass and away from the PlayStation Plus. “As Microsoft foreclosed PlayStation/PlayStation Plus, it would likely become a critical distribution channel for independent developers. In that weakened negotiating position, independent developers would likely receive worse terms for their content from Microsoft or even be required to promise exclusivity in return for distribution, thereby diminishing independent developers’ ability and incentive to invest in high-quality new games. This, in turn, would also harm consumers even further.” The UK CMA has until March 1, 2023, to publish the results of its in-depth investigation and decide on a course of action on the deal by the commission or other agencies “to remedy, mitigate or prevent the substantial lessening of competition” and if so, what action should be taken.” The EU Commission has also moved to probe further into the merger. There are also reports that the US Federal Trade Commission would be challenging the deal and is considering filing an antitrust lawsuit against Microsoft.
