The UK’s Competition and Markets Authority released an issue statement today outlining a number of concerns regarding the proposed Microsoft acquisition of Activision Blizzard and dismissing some of the Xbox maker’s key arguments.
The first question it addressed was whether the acquisition would result in Xbox making Call of Duty exclusive (“foreclosure,” in CMA terminology), something Microsoft has said it doesn’t plan to do, but only commits to. to continue using PlayStation for several years.
“Financial modeling of the merger suggests that the merged entity’s incentive to foreclose Sony may be significantly stronger than suggested by the parties,” the CMA noted.
“Microsoft’s past business practices suggest it may be willing to make a short-term loss to build scale and increase its user base,” it continued, noting that Microsoft has previously acquired multiplatform publishers and made their games exclusive. .
It also rejected arguments that Microsoft would keep Call of Duty multiplatform simply to avoid public backlash, saying it has “find no convincing evidence that Microsoft would be deterred from engaging in full or partial foreclosure strategies by the prospect of reputational damage.” to Xbox or [Call of Duty].”
Given how a Call of Duty exclusive could shape consumer decisions about which console to buy, the CMA determined that it would affect Sony’s ability to compete with Microsoft, which “would adversely affect the overall competition in the market and ultimately harm consumers.”
While the CMA said it was examining the acquisition’s impact on competition in general, Sony’s clear status as Microsoft’s closest rival in a “highly concentrated” console market merited specific attention. While acknowledging Nintendo’s role in the market, it noted that the company offered “differentiated” hardware, with more family-friendly software.
Parties wishing to weigh in on the issue statement have until October 28 to respond to the CMA in writing.
The matter statement follows a separate CMA review of the deal released earlier this week.