Britain’s competition watchdog has threatened to block Microsoft’s $69bn (£57bn) merger with Activision Blizzard or force the PC-maker to sell the best performing video game involved in the deal.
The Competition and Markets Authority (CMA) said it was considering ordering the “divestiture of the business associated with Call of Duty” after an in-depth investigation of the deal.
Activision’s Call of Duty, which sees players take control of soldiers in war zones around the world, is one of the most popular video games in the world. Its various titles have sold more than 400m copies globally.
The CMA said Microsoft could be incentivised to make Call of Duty exclusive to its Xbox consoles, thereby locking out rival Sony’s Playstation, reducing competition and potentially increasing prices for gamers. The availability of exclusive games can prompt players to switch between consoles and is viewed as critical to boosting sales.
Martin Coleman, chair of the CMA’s inquiry into the deal, said: “Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation. We have provisionally found that this may be the case here.”
The decision is a significant blow to Microsoft, given Call of Duty’s crown jewel status for Activision Blizzard. The US company also owns titles including online fantasy game World of Warcraft and mobile game Candy Crush.
Executives at Activision Blizzard have warned an attempt to block the deal would scupper Rishi Sunak and Jeremy Hunt’s hopes of challenging the dominance of Silicon Valley.
Bobby Kotick, the company’s chief executive, told CNBC: “If a deal like this can’t get through, they are not going to be Silicon Valley, they will be Death Valley.”
The CMA threatened to block the deal altogether unless Microsoft agrees to sell-off Call of Duty or other significant parts of the business as part of the merger. The regulator said it would make a final decision in April.
The merger has attracted opposition from Playstation maker Sony, which has claimed Microsoft could use the deal to limit its access to future Call of Duty games.
The CMA also said it was concerned about Microsoft’s growing command of “cloud gaming”, where consumers can play games without being tied to any one console. Microsoft has emerged as a leader in cloud gaming and could make the game exclusive to its own online Xbox gaming hub, the regulator claimed.
The watchdog is expected to examine “behavioural” remedies alongside possible divestures. These could see Microsoft forced to agree to keep its game open to rivals. Microsoft has insisted it would have no motivation to block Sony’s access to the game, which would reduce sales of the series.
Rima Alaily, Microsoft’s deputy general counsel, said the company had offered “100pc equal access” to the franchise to its main gaming rivals. This would include 10 years of equal treatment on new game releases, pricing, and in-game features.
An Activision Blizzard spokesman said: “We hope between now and April we will be able to help the CMA better understand our industry.”
Video game sales are worth £5bn per year in the UK alone. The whole sector is worth more than the movie and music industry combined.
The UK competition watchdog has taken an increasingly aggressive approach to major technology deals amid concerns over the growing clout of tech giants such as Google and Meta.
The Microsoft deal is facing other investigations in Europe and a legal challenge from US regulators. In a memo to staff, Mr Kotick added he was “confident that the law – and the facts – are on our side”.