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Should the deal be allowed to fly, the regulator fears the company will limit the blockbuster titles from Activision Blizzard to its console alone.
The previous acquisition agreement between American multinational tech company, Microsoft Corporation (NASDAQ: MSFT) and gaming giant Activision Blizzard Inc (NASDAQ: ATVI) is now in doubt after the United Kingdom Competition and Markets Authority (CMA) flagged the deal for anti-competitive tendencies.
As reported by CNBC, the CMA shared some recommendations in what appears as a provisional decision on Wednesday. According to the regulator, the acquisition of Activision Blizzard will be detrimental to the gaming community in the United Kingdom as the tendency for Microsoft to monopolize some of the game titles is high.
As reported by Coinspeaker early last year, Microsoft reached an agreement to take over Activision Blizzard for the sum of $69.3 billion. The deal, posited as one of the largest in the Merger and Acquisition (M&A) world was doubted at the time as the chances for antitrust scrutiny were very glaring.
The UK CMA opened its investigation into the deal back in July and it may move to block the deal following the updates shared on Wednesday. The CMA has four different recommendations for the companies including selling the business associated with its popular Call of Duty franchise; divesting the Activision segment of Activision Blizzard; divesting both Activision and Blizzard; or terminating the deal completely.
The notice was sent to both Microsoft and Activision Blizzard on February 22 to file a response as the regulator works towards a final verdict by April 26. Per the concerns shared by the CMA, it fears Microsoft could monopolize the yet-to-be-popular Cloud gaming market.
Microsoft owns the Xbox console which competes with Sony Corporation’s (NYSE: SNE) PlayStation and Nintendo’s Switch. Should the deal be allowed to fly, the regulator fears the company will limit the blockbuster titles from Activision Blizzard to its console alone.
Microsoft and Activision Blizzard Inc’s Response to the CMA
Following the initial decision from the CMA, Microsoft’s Corporate Vice President and Deputy General Counsel Rima Alaily said it is “committed to offering effective and easily enforceable solutions that address the CMA’s concerns.”
The duo of Microsoft and Activision Blizzard has maintained that its plans to merge will not pose any anti-competitive challenges in the industry. The companies said they have made commitments to Sony and Nintendo to make the Call of Duty Franchise available on their respective consoles for the next 10 years.
Activision Blizzard CEO Bobby Kotick said the law and the facts are on its side in an emailed statement to employees.
“In this case, our combined companies will bring more competition to an already crowded field of world-class gaming competitors, including Sony, Tencent, NetEase, Apple, Amazon, and Facebook,” Kotick said. “We believe this merger gives us additional resources to compete with such giants.”
Besides the UK, the deal between both companies is also awaiting an antitrust verdict from the US Federal Trade Commission (FTC) and the European Commission.