The U.K. Competition and Markets Authority (CMA) has issued updated provisional findings to narrow its scope of review in the proposed Microsoft acquisition of Activision Blizzard. The new findings reach the provisional conclusion that overall the transaction will not result in a substantial lessening of competition for console gaming in the U.K. market
This new finding does not change the concerns about the competition in the supply of cloud gaming services.
Analysis
The CMA launched Phase 2 of its investigation into Microsoft’s proposed acquisition of Activision Blizzard last fall. The investigation was based on two theories of harm. Theory of Harm 1 was 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.
Back in October, when Microsoft filed a response, DFC stated that Theory of Harm 2 was the more serious issue. However, Microsoft focused much of its response on Theory of Harm 1. As we stated at the time, we thought Microsoft’s response to the more serious Theory of Harm 2 was rather glib.
In February, the CMA issued a 275-page document that had provisional findings supporting both theories of harm. However, the latest update shows that Theory of Harm 1 is no longer considered a threat and the main focus will be on Theory of Harm 2.
Overall this is good news for those betting on the merger going through. However, it is not that surprising. Theory of Harm 1 was a rather ridiculous concern focused on potential harm to one company, market leader Sony. Theory of Harm 2 is a more serious issue around the control of cloud distribution that could have a significant impact on consumer options.
Nevertheless, this is a further indication that the merger is likely to be approved.
