The UK’s Competition and Markets Authority (CMA) is launching dual investigations into Microsoft’s proposed acquisition of videogame maker Activision Blizzard, and Amazon’s competitive practices related to its Marketplace platform.
In January 2022, Microsoft announced it was planning to purchase Activision Blizzard for $68.7 billion, making it potentially Microsoft’s biggest-ever acquisition at $26 billion more than the company paid for LinkedIn in 2016.
On July 6, 2022, the CMA started inviting views on the deal, with a submission deadline of July 20. The CMA has provisionally set itself a deadline of September 1, when it will either approve the deal or instigate a more in-depth phase two review.
Earlier this month, Linda Khan, chair of the US Federal Trade Commission (FTC), also confirmed that the agency was “examining effects on competition in all relevant markets for potential law enforcement action.”
The acquisition immediately came under scrutiny due to a suit filed by California's Department of Fair Employment and Housing in July 2021 that cited “numerous complaints about unlawful harassment, discrimination, and retaliation” at the company.
However, the CMA says it will not be investigating the workplace culture at Activision Blizzard, instead focusing on whether the deal would reduce competition in the UK.
Why are the CMA and FTC investigating?
Lewis Ward, research director of gaming, eSports and VR/AR at IDC said that given the size of the deal, it shouldn’t be a surprise that agencies in multiple countries are reviewing the competitive impacts of the proposed buyout.
While regulators are likely concerned that Microsoft might start making some popular Activision or Blizzard games exclusive to their Xbox or Windows PC platforms, he doesn’t believe that will be the case, as massive Activision franchises like Call of Duty are set to remain accessible across various gaming platforms indefinitely.
“Call of Duty has been the number one console franchise for the past decade by revenue, so it’s understandable that regulators would want to get a better understanding of plans that relate to its future, to help ensure that gamers aren’t going to be forced to buy Xbox hardware or a Windows 11+ PC to play,” he said.
If authorities are satisfied that these titles will be available across platforms indefinitely, Ward sees no reason why the deal won’t ultimately be approved.
“We will fully cooperate with the CMA’s merger review,” Lisa Tanzi, corporate vice president and general counsel at Microsoft said in a statement. “We expect and think it’s appropriate for regulators to take a close look at this acquisition. We have been clear about how we plan to run our gaming business and why we believe the deal will benefit gamers, developers, and the industry.” She remains confident that the deal will close in fiscal year 2023 as initially anticipated.
Amazon Marketplace under the microscope
This deal is not the only current investigation against a major tech company the CMA has underway. Only July 5 it announced an investigation into Amazon’s UK Marketplace platform.
The investigation will focus on three competitive areas: The way that non-public third-party seller data may be used within Amazon’s retail business, how Amazon sets criteria selecting which product offer is placed within the ‘Buy Box’, and which sellers can list products under Amazon’s Prime brand on its Marketplace in the UK.
No decision date for the outcome of this investigation has been announced.
Reforming UK digital competition laws
Earlier this week, EU lawmakers officially passed the Digital Markets Act which, in part, enables a growing range of antitrust actions and strengthens digital competition rules.
In 2019, an expert panel led a review into the UK’s digital competition laws, recommending that new regulations should be introduced. “Digital markets will only work well if they are supported with strong pro-competition policies that open up opportunities for innovation,” the review concluded.
The UK government published a white paper in 2021 outlining a new “pro-competition regime” for digital markets and opened a consultation into the new set of proposals. A response was published in May 2022, which considered “broader competition reforms” and made a number of proposals which the government said would help “improve competition and protect consumers in digital markets more widely.” The findings ultimately formed the draft version of the Digital Markets, Competition and Consumer Bill.
However, when the government set out its legislative agenda at the re-opening of Parliament, four days after the response was published, no timetable was outlined by the government for introducing the new legislation to Parliament.
The resignation of Prime Minister Boris Johnson this week, accompanied by the news that no new large pieces of legislation would be enacted until a new leader is in place, means the Bill now faces even further delays.
Writing for the Centre of European Reform, Zach Meyers, senior research fellow at CER, said “if the UK falls behind in tech regulation, UK tech startups may prefer to grow in the EU, where the Digital Markets Act will make their lives easier.”
Meyers also noted that if the US adopts digital competition reforms, they are more likely to reflect the Digital Markets Act rather than the UK’s proposals, meaning the UK could ultimately suffer a loss of global influence.