CMA may require Microsoft to sell Activision or Call of Duty for merger approval

Regulators at the UK's Competition and Markets Authority outline possible divestiture requirements that may need to be followed to get the merger approved.

CMA may require Microsoft to sell Activision or Call of Duty for merger approval
2 minutes & 50 seconds read time

Regulators at the Competition and Markets Authority (CMA) have outlined preliminary remedies that may be required to get the Microsoft-Activision merger passed in the United Kingdom.

CMA may require Microsoft to sell Activision or Call of Duty for merger approval 51

Today the CMA published a very important series of documents relating to the Microsoft-Activision merger. The CMA's Inquiry Group (Martin Coleman, John Thanassoulis, Humphrey Battcock, Ashleye Gunn) released their provisionary findings on the merger. In the 277-page provisional findings document, the Inquiry Group has determined the merger could have Substantial Lessening of Competition (SLC) effects in two markets: Console gaming and cloud streaming.

The Inquiry Group has summarily published a list of possible remedies, or guidelines, that Microsoft may need to follow in order to get the merger approved. The remedies are based on the findings of the Inquiry Group's investigation, which does not fully reflect recent developments such as Microsoft's offer to bring the $32 billion Call of Duty franchise to PlayStation, Nintendo, and PC platforms for a 10-year period. Microsoft's offer was made publicly to quash concerns about Call of Duty platform exclusivity.

These remedies are not set in stone and the CMA is inviting discussions from the games industry, principally Microsoft, Activision, and the complainant Sony. The CMA will consider evidence and compelling remedy offers made by these companies while collecting more information before it makes a decision.

The remedies are listed provisionally and are subject to change. The CMA apparently holds a separate process for remedies. This report from the Inquiry Group is primarily focused on competitive effects and preliminary remedies based on these determinations.

There are various types of remedies. We've outlined the two major ones--behavioral and structural--in a previous article. The following is a structural remedy, and the Inquiry Group currently believes that structural remedies may be sufficient to avoid anti-competitive concerns. However, this determination does not include the 10-year Call of Duty offer made by Microsoft.

On the structural basis, the CMA's Inquiry Group suggests some interesting remedies that may force Microsoft to divest, or sell, parts of the Activision-Blizzard business in order to minimize SLCs, or anti-competitive effects.

Here's an except from Page 6, Para. 28 in the CMA's list of possible remedies:

...The CMA is considering the effectiveness of three different partial divestiture packages:

(a) the business associated with Call of Duty;

(b) the Activision segment; or

(c) the Activision segment and the Blizzard segment.

The CMA says that it typically will choose divestures of segments that can operate independently. Activision has operated independently of Blizzard and King for many years, but it was only after the combination of these three where the company was able to hit its current stride. Divesture of these companies will significantly affect Activision's bottom line.

The CMA has called upon companies and third-parties to submit views, testimony, and information regarding its preliminary divesture remedies (as well as feedback about possible behavior remedies).

In short, Microsoft and Activision must provide a cohesive argument to push back against these anti-competitive claims and SLCs in order to convince CMA regulators. Based on the document it appears that the CMA could be willing to iron out a deal using a combination of behavioral and structural remedies in order to counter the possible SLCs, and that the 10-year licensing deal may be sufficient as a behavioral remedy.

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Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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