The UK competition regulator has performed a U-turn on Microsoft’s $75bn acquisition of the Call of Duty maker Activision Blizzard, clearing a huge roadblock to the deal’s global prospects.
After reviewing what it called “new evidence”, the Competition and Markets Authority said on Friday that it no longer thought there would be a “substantial lessening of competition” in the console market if the Xbox maker takes over the publisher of the bestselling game franchise.
Provisional findings by the CMA last month suggested that Microsoft would need to sell the Call of Duty business for the deal to go through, a remedy the software giant dismissed as unviable.
“This is extremely unusual,” said an ex-CMA lawyer. “Restating your provisional findings is something you would rather die than do.”
The CMA’s shift in position, in one of its highest-profile cases since its powers and size were boosted by the UK’s departure from the EU, eases Microsoft’s path to closing the deal.
The UK regulator is still investigating the transaction’s impact on competition in cloud gaming, the focus of a separate EU probe.
The last remaining regulatory barrier is the US Federal Trade Commission, which filed to block the acquisition in December.
Shares in Activision Blizzard had risen more than 5 per cent by Friday afternoon in New York, although at around $84 it is still trading below Microsoft’s $95 offer price.
Bobby Kotick, Activision chief executive, had warned that a “fragile” UK government could miss a post-Brexit opportunity to attract thousands of jobs if it blocked the deal, attacking the British regulator for “not really using independent thought”.
In its provisional findings last month, the CMA said its evidence suggested that the deal would give Microsoft motivation to limit Call of Duty’s availability on Sony’s rival PlayStation.
But Microsoft argued that assessment was undermined by financial modelling mistakes. It added this month that there had been “clear errors in the figures being used to value the small number of Sony customers who might move to Xbox in the absence of Call of Duty”.
The CMA said on Friday that it had received a “significant amount of new evidence in response to its original provisional findings” that indicated any move by Microsoft to make Call of Duty exclusively available on Xbox would be “significantly lossmaking under any plausible scenario”.
Martin Coleman, chair of the independent panel conducting the CMA’s investigation, added that provisional findings were intended to “give the businesses involved, and any interested third parties, the chance to respond with new evidence before we make a final decision”.
But one leading antitrust lawyer said there had been only one previous “occurrence of ‘updated’ provisional findings that I’m aware of”.
Microsoft said it appreciated “CMA’s rigorous and thorough evaluation of the evidence”, welcomed the updated provisional findings and looked forward to working with the regulator “to resolve any outstanding concerns”.
“The CMA’s updated provisional findings show an improved understanding of the console gaming market and demonstrate a commitment to supporting players and competition,” Activision Blizzard said. “Microsoft has already presented effective and enforceable remedies to address each of the CMA’s remaining concerns.”
In its continuing investigation on the deal’s potential impact on cloud gaming, the CMA has said that Microsoft could be motivated to make Activision Blizzard games exclusive to Game Pass, its subscription service.
Microsoft has struck agreements with Nvidia, Ubitus and Boosteroid in recent weeks to distribute Activision Blizzard’s games on their cloud gaming services.
Additional reporting by Javier Espinoza
