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Microsoft accuses the UK regulator of 'adopting Sony's complaints' regarding the Activision Blizzard acquisition

Microsoft accuses the UK regulator of 'adopting Sony's complaints' regarding the Activision Blizzard acquisition

Microsoft has criticized the UK Competition Commission's decision to broaden its investigation into the company's proposed acquisition of Activision Blizzard.

The Competition and Markets Authority (CMA) announced in September that its investigation into the $68.7 billion merger had been officially expanded to a second phase due to a number of antitrust concerns.

The CMA detailed its reasoning for its concerns in full on Wednesday, including the impact of competition in the console, game streaming, and subscription spaces.

Microsoft has responded to the CMA's decision by calling the regulator's concerns "misplaced" and claiming that it "adopts Sony's complaints without the appropriate level of critical review."

"These unsubstantiated theories of harm are insufficient to justify a referral to Phase 2," Microsoft stated. "It is not credible to suggest that the incumbent market leader, with clear and enduring market power, could be foreclosed by the third largest provider as a result of losing access to one title," it added.

"While Sony may not welcome increased competition, it is adaptable and competitive."

The Xbox owner cited Sony's dominance in the console market, citing a 150 million install base versus Xbox's 63.7 million.

It made reference to recent price increases for the PS5 in some regions, saying, "Sony engages in conduct today which is reflective of its market power in console gaming, including increasing prices of its consoles without fear of losing market share."

Microsoft asserted that as of 2021, the PlayStation had more than 280 first- and third-party exclusive titles, nearly five times as many as the Xbox. They also pointed out Sony's own recent acquisitions of businesses like Bungie and Haven.

The Referral Decision, it said, "incorrectly relies on self-serving statements by Sony which significantly exaggerate the importance of Call of Duty to it and neglect to account for Sony's clear ability to competitively respond. In short, Sony is not vulnerable to a hypothetical foreclosure strategy."

"Sony has the flexibility to adapt and compete, even though it may not welcome more competition. Ultimately, the increased competition and choice will benefit gamers.

Microsoft has reiterated its intention to keep Call of Duty on PlayStation consoles, claiming that removing the series from the competitor console would "tarnish both the Call of Duty and Xbox brands." The company also claimed that adding Activision Blizzard games to Game Pass would provide players with more options.

Finally, Microsoft stated that if players choose to leave PlayStation for Xbox, it will be because Xbox provides more options than its competitor.

Activision Blizzard

"Should any consumers decide to switch from a gaming platform that does not allow them to choose how to pay for new games (PlayStation) to one that does (Xbox), that is the type of consumer switching behavior that the CMA should consider welfare enhancing and indeed encourage." The CMA should not be attempting to prevent this."

The CMA stated in its extensive summary of its decision to broaden its investigation that it is concerned that the deal could harm PlayStation and other game subscription services if Microsoft makes Activision Blizzard content exclusive to its platform.

The regulator is also concerned that Microsoft will use this content to outcompete game streaming competitors like Amazon and Nvidia.

"After reviewing a variety of evidence, the CMA believes that the Merger meets the threshold for referral to an in-depth phase 2 investigation, raising the realistic prospect of a substantial lessening of competition (SLC) in gaming consoles, multi-game subscription services, and cloud gaming services," it stated.

The proposed acquisition is currently being reviewed by regulators around the world due to antitrust concerns at a time when the gaming industry is consolidating.

The CMA has appointed an independent panel to examine the deal in greater detail and determine whether it is more likely than not to result in a significant reduction in competition.

Finally, the CMA has the authority to halt mergers and acquisitions if it determines that appropriate action is not being taken to address a decrease in competition.

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