Xbox Facing Anti-Competition Probe In The UK Over Activision Deal, Phil Spencer Responds

The UK's Competition and Markets Authority believes the deal could "substantially lessen competition," but Spencer does not agree.

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The UK's Competition and Markets Authority has said it is "concerned" that Microsoft's proposal to buy Activision Blizzard could "substantially lessen competition" for sales of game consoles, subscription services, and cloud gaming networks. In response to this, Microsoft Gaming CEO Phil Spencer released a note in which he claimed Microsoft is not being anti-competitive.

In a press release, the CMA said is is concerned that "if Microsoft buys Activision Blizzard it could harm rivals, including recent and future entrants into gaming, by refusing them access to Activision Blizzard games or providing access on much worse terms."

Microsoft's deal to buy Activision Blizzard is facing increased scrutiny in the UK
Microsoft's deal to buy Activision Blizzard is facing increased scrutiny in the UK

Additionally, the CMA said it has seen "evidence" that if Microsoft and Activision Blizzard combine, it could create a system to "damage competition in the nascent market for cloud gaming services." The CMA pointed out that Microsoft already has a popular console (Xbox), a major cloud platform (Azure), and the leading PC operating system (OS).

Due to its concerns, the CMA said it would consider conducting a "Phase 2 investigation." In light of this, Microsoft and Activision Blizzard have five working days to respond to CMA's concerns, or else the CMA will launch its Phase 2 investigation.

Should it reach Phase 2, an independent panel of "experts" will look into the concerns outlined by the CMA.

CMA senior director of mergers Sorcha O'Carroll said, "Following our Phase 1 investigation, we are concerned that Microsoft could use its control over popular games like Call of Duty and World of Warcraft post-merger to harm rivals, including recent and future rivals in multi-game subscription services and cloud gaming."

O'Carroll added, "If our current concerns are not addressed, we plan to explore this deal in an in-depth Phase 2 investigation to reach a decision that works in the interests of UK gamers and businesses."

Microsoft seemingly anticipated the CMA releasing this notice today, as a blog post from Spencer on Microsoft's website was published today as well. In it, Spencer said the buyout of Activision Blizzard is not about limiting who can play its games and use its services--it's about growing.

Spencer pointed out that consoles are "not the only way that people play games." He went on to mention that mobile is the biggest and fastest-growing segment of gaming, which is why Microsoft is pushing so hard to buy Activision Blizzard and acquire its Candy Crush division.

"To reach the billions of players where they are and no matter what device they play on, we need to embrace choice. Giving players choice in how they play their games makes gaming more accessible and leads to larger, more vibrant communities of players," Spencer said. "Choice is equally important to developers. Developers benefit from having a diversity of distribution and business models for their games. Choice unlocks opportunities for innovation and enables the industry to grow."

Spencer went on to say that Microsoft is "expanding choice" by building out Xbox Game Pass, going on to add that Overwatch, Diablo, and Call of Duty are all going to join the Game Pass catalog. Microsoft's other effort to "expand choice" is to launch more games on mobile, and Spencer said this "requires new capabilities"; this is where Activision Blizzard comes in. Not only that, but Spencer called out Microsoft's cloud game streaming technology as another example of how the Xbox company is attempting to grow, not limit, the audience for its games.

"The expertise that the teams at Activision Blizzard bring in developing games for mobile platforms will help us understand how to create games that engage players around the world," he said. "In addition, we hope that players will be eager to play traditional console games from Activision Blizzard on other platforms via our cloud game streaming technology. This promises to open up mobile gaming, creating new distribution opportunities for game developers outside of mobile app stores while delivering compelling and immersive experiences for players by using the power of the cloud. And we can extend the joy of playing to devices that people already own, including Smart TVs and laptops."

Spencer specifically also reminded people that Microsoft will make the "same version of Call of Duty available on PlayStation on the same day the game launches elsewhere." Additionally, Spencer said Microsoft won't block crossplay with competing consoles.

The executive pointed out that Microsoft has a history of supporting rival platforms, pointing to how Minecraft remained on PlayStation and Nintendo platforms after the company acquired developer Mojang.

"We will continue to engage with regulators with a spirit of transparency and openness as they review this acquisition. We respect and welcome the hard questions that are being asked," Spencer said. "The gaming industry today is robust and dynamic. Industry leaders, including Tencent and Sony, continue to expand their deep and extensive libraries of games as well as other entertainment brands and franchises, which are enjoyed by players everywhere. We believe that a thorough review will show that the combination of Microsoft and Activision Blizzard will benefit the industry and players."

So far, some seven months after Microsoft announced its proposal to buy Activision Blizzard, only Saudi Arabia has approved the deal. New Zealand's decision is due tomorrow, September 2.

Activision Blizzard CEO Robert Kotick released a statement today, too, in which the executive said a "couple of countries" have approved the deal so far, though he did not name them outright. Kotick also mentioned that Activision Blizzard will "fully cooperate" with the UK's regulators as its case continues.

What's more, Kotick said he will hold town hall meetings with employees to keep them up to date on how the deal is progressing. You can see Kotick's full statement below.

Kotick Statement:

September 1, 2022

Team,

I wanted to provide a brief update of our progress towards the completion of our merger with Microsoft. As we said from the outset, this is a long process. With the number of government approvals required, we still believe the deal is most likely to close in Microsoft’s fiscal year ending June of next year. We are fortunate to have already received approvals from a couple of countries, and the process with all of the regulators is generally moving along as we expected.

This week we heard from the United Kingdom, where we have more employees than anywhere except North America. We have entered the second phase of our review there, and we will continue to fully cooperate with the regulators there, and everywhere approvals are required.

As our industry continues to see numerous companies investing aggressively in gaming, including many of the world’s largest technology and media companies, government regulators are taking appropriate and deliberate steps to better understand our industry and the growing competition from around the world.

Beginning in September, I am going to initiate town halls to keep everyone informed of our continuing progress towards our future as part of one of the world’s most admired companies.

We have a very exciting fall ahead of us with anticipation building for our new games. Thank you all for working so hard to continue to connect, engage, and entertain our players around the world.

With appreciation,

Bobby

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