Another hurdle for Activision Blizzard, the games giant behind “Call of Duty” that Microsoft is looking to acquire for $68.7 billion. The UK Competition and Markets Authority has: announced a formal inquiry into the proposed deal. This opens up the investigation to feedback from “any interested party” before the CMA decides whether to launch a Phase-2, deeper investigation into whether the deal is anti-competitive and represents antitrust violations in the UK. These interested parties have until 1 September for answers.
Areas it will judge include whether the deal leads to higher prices, lower quality or reduced choice in games and the gaming ecosystem.
“The Competition and Markets Authority (CMA) is considering whether it is or may be that this transaction, if executed, will create a relevant merger situation under the merger provisions of the Companies Act 2002 and, if so, whether the creation such situation is expected to lead to a substantial reduction of competition within a UK market or markets for goods or services,” it notes.
If the deal goes through, it will be one of the largest mergers and acquisitions ever in technology, led by one of the world’s largest tech companies and featuring some of the world’s most popular brands in digital entertainment – which in addition to “Call of Duty” also includes ‘World of Warcraft’ and ‘Candy Crush’. So in that regard, the antitrust investigation is a pretty routine move. As the CMA notes, “The deal will be reviewed by competition authorities around the world and, as is customary, the CMA will liaise with its counterparts as appropriate.”
The CMA notes that its more formal criteria for reviewing investigations is that it can do so in cases where two or more companies cease to distinguish and “ewhether the UK turnover of the acquired company is in excess of £70 million, or the 2 companies supply/acquire at least 25% of the same goods/services supplied in the UK and the merger increases the share of the offer.”
The US has introduced a similar set of rules for initiating antitrust investigations, so it is not surprising that the FTC in the US also currently investigating the agreement. Regulators have been known to compromise deals or add stipulations to deals, as well as nod them.
The CMA has played an important role in the fate of the business development strategies of several major technology companies in recent years. It knocked down Nvidia’s acquisition of Arm, but it nodded at Microsoft’s $20 billion acquisition of Nuance. It is also currently investigating Google’s adtech stack and finally investigating the duopoly in mobile in the country that is Apple and Google. While it didn’t cause much of a stir with Facebook’s acquisition of WhatsApp a few years ago, more recently it has ordered the company to sell Giphy. One way to get past the regulatory concerns at the CMA is for companies to downsize their acquisitions, as eBay and Adevinta did when they sold several assets to get their ad deal past.
The news of the antitrust investigation comes at a time when Activision Blizzard has already endured a number of controversies, particularly around its labor practices and broader human relations.
When Microsoft’s offer for Activision was first announced in January this year, quality assurance testers at Raven Software, a division of Activision, had been on strike for about five weeks because of contract terminations for some employees and what they saw as unfair treatment. by the company, given the stress this group faces in their day-to-day work. They voted to unionize in May, making it the first union in a major gaming company.
In addition, the company is subject to intense public scrutiny and workplace culture regulations. The company, which employs a total of approximately 10,000 people worldwide, was the subject of a two-year investigation by the California Department of Fair Employment and Housing. it eventually filed a lawsuit against Activision Blizzard in July 2021, who claimed a “frat boy” work culture at the company and described it as a “breeding ground for harassment and discrimination against women.” In addition, Bobby Kotick, who has been the company’s CEO since 1991 (originally at Activision before the Blizzard merger), Reportedly were aware of allegations of sexual misconduct and rape, but failed to act.
To be clear, details of the HR drama at the company are beyond the scope of the antitrust investigation, but they do add to the bigger picture of a company under attack.
Those providing feedback on the merger to the CMA can that be done here and have until September 1 to submit their entries.