Regulators in the UK haven't been convinced that Microsoft's buyout of Activision-Blizzard is good for competition, and require more information in order to make an informed decision.
The United Kingdom's Competitions and Markets Authority (CMA), which is basically the UK's version of the FTC, has requested more information on Microsoft's proposed $68.7 billion buyout of Activision-Blizzard. The CMA has publicly said that it has concerns that the deal could affect competition in the video games sphere, namely with gaming subscriptions, gaming consoles, and the emerging and fast-growing cloud market.
The CMA says that it has "identified a realistic prospect of significant lessening of competition in the UK, including gaming consoles, multi-game subscription services, and cloud gaming services."
The reality is that this is not only to be expected, but it's standard operating procedure. The CMA is effectively starting its investigation into Microsoft's proposed buyout. The CWA is simply issuing a surface-level statement on its initial thoughts on the deal, and from what it sees based on unspecific reports, data, and information, the body says that it has concerns. But any regulatory body should scrutinize a deal of this magnitude; the Activision buyout is the single largest video games merger in the history of the industry and is some 6-times larger than the second-biggest acquisition, Take-Two's buyout of Zynga of $12.7 billion.
The CMA is requesting more information in what it calls a Phase 2, which seems similar on the surface to the FTC's Second Request procedure, which sees the FTC asking both parties for more information--confidential data like sales figures, game volume sales, projected game releases, and more are all subject to review. The FTC has recently issued a Second Request for the deal which Microsoft has complied with.
The main difference between the Second Request and the CMA's Phase 2 is that the CMA involves independent panels of experts to evaluate both companies' overall business and post-merger plans to identify any potential competitive concerns.
At Phase 2, the CMA appoints an independent panel to examine the deal in more depth and evaluate whether it is more likely than not that a substantial lessening of competition will occur as a result of the merger - a higher threshold than Phase 1. It typically builds on the work and evidence from Phase 1 with more third-party engagement via requests for information and use of its statutory powers in gathering internal documents. At Phase 2, the CMA will also carry out further in-depth review of the merging parties' internal documents which show how they view competition and the market.
Microsoft and Activision-Blizzard now have 5 days to comply with the CMA's Phase 2 request.
"Following our Phase 1 investigation, we are concerned that Microsoft could use its control over popular games like Call of Duty and World of Warcraft post-merger to harm rivals, including recent and future rivals in multi-game subscription services and cloud gaming," CMA Senior Director of Mergers Sorcha O'Carroll said.
"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."
Other regulatory bodies like Saudi Arabia's General Authority for Competition (GAC) has given a no objection ruling to Microsoft's buyout.