Early on Wednesday, the CMA released its preliminary findings on the effects of the merger between Activision Blizzard, which is known for its wildly successful gaming franchises like “Call of Duty,” “World of Warcraft,” and “Candy Crush,” and Microsoft, the maker of the Xbox gaming console. The merger “may be expected to result in a substantial lessening of competition (SLC) in gaming consoles and cloud gaming services in the UK,” the CMA stated in its analysis of the merger.
According to the same sources, there is still a high level of confidence at Activision that the U.K.’s Competition and Markets Authority (CMA), which sources told FOX Business is “the only regulatory body that really matters” in the merger case, will examine the numbers and determine that the acquisition will not harm gamers, despite what the CMA claimed on Wednesday.
The 16-page report expresses concern about Microsoft’s potential to exercise excessive power after the merger.
“In terms of gaming consoles, we preliminary found that PlayStation and Xbox compete closely with one another and that Call of Duty (CoD) from Activision is essential to each’s competitive offering.
The evidence indicates that, following the Merger, Microsoft would consider it to be in their best interests commercially to make Call of Duty exclusive to Xbox or to make it available on Xbox on materially better terms than PlayStation, according to the document.
The report went on to say, “We provisionally found that this would substantially reduce competition in gaming consoles to the detriment of gamers—Xbox and PlayStation gamers alike—which could result in higher prices, reduced range, lower quality, worse service, and/or reduced innovation.
Microsoft might be mulling that one over in its head. Microsoft released a statement in response to the CMA’s provisional report, reiterating its earlier promise to provide “100% equal access to Call of Duty” on all major platforms, including PlayStation.
Microsoft’s corporate vice president and deputy general counsel, Rima Alaily, stated to the gaming portal Eurogamer, “The definition of 100% Equal is what we mean when we use the word. parity for ten years. on subject. on the cost. on the features. on level. regards playability.” Analysts took aim at the CMA’s case as well. After the CMA released its preliminary findings, MoffettNathanson’s Clay Griffin, who has an outperform rating on Activision and a $95 price target, bluntly stated the following in a note explaining why Microsoft might still be in the lead to win the merger fight: “We firmly believe that “structural remedies, i.e., divesting CoD (Call of Duty), the Activision segment, and/or the Activision segment and the Blizzard segment, in order to appease regulators is neither realistic nor necessary to ensure a fair and competitive gaming market,” and that “the decision, on both accounts, is the wrong anti-trust conclusion.” This is obviously a complete non-sequitur, so we won’t spend much time on it.”