The U.K. Competition and Markets Authority (CMA) published its latest findings in its ongoing inquiry into the Activision Blizzard merger.  These provisional findings are part of the ongoing Phase 2 investigation that started last September and is scheduled to be completed by April 26, 2023.

The 275-page document concludes with two major issues:

  1. As a result of our assessment, we have provisionally concluded that the anticipated acquisition of Activision by Microsoft constitutes arrangements in progress or in contemplation which, if carried into effect, will result in the creation of an RMS.  
  2. We have also provisionally concluded that the creation of that situation may be expected to result in an SLC in the supply of console gaming in the UK and in the supply of cloud gaming services in the UK, in each case due to vertical effects resulting from input foreclosure. 

The full report is available here with a summary of the history of the CMA investigation here.

Analysis

In the latest findings the CMA continued to make arguments around the two major theories of harm they revealed last October.  Theory of Harm One is that Activision Blizzard’s game catalog will enable Xbox to foreclose its competitors in gaming markets.  Theory of Harm 2 suggests Microsoft will have an advantage over rivals in cloud gaming by having a broad “multi-product ecosystem including a leading cloud platform and PC operating system.”

Microsoft responded to the CMA issues last fall and focused primarily on the Theory of Harm One (what we call the damage to Sony theory).  Back in October DFC argued that Microsoft’s response to the CMA Theory of Harm 2 was rather glib and that could come back to bite the company.

Indeed nearly 80 pages of the document dealt with the Theory of Harm 2.  Unlike the FTC, which seems to be doing a superficial dig into the issues, the CMA appears to be taking the matter seriously.  The CMA looked into details around cloud delivery including offerings from competitors Amazon, Google, and Nvidia.

Overall DFC still believes the arguments against the merger to be weak.  The merger is still expected to be approved.  However, the issues raised by the CMA, especially in Theory of Harm 2, appear to be the most serious.