The UK’s competition watchdog has taken a step closer to potentially blocking Microsoft’s planned $69bn (£56bn) takeover of Call of Duty games company Activision.
In an interim decision, the Competition and Markets Authority (CMA) said the proposed combination could lead to higher prices, less choice and less innovation for UK players.
Activision responded by saying the regulator doesn’t understand the market.
The massive affair, first announced over a year agowas designed to strengthen the Xbox maker Microsoft position in the lucrative gaming industry.
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But Microsoft’s strategy has been met with a series of complaints from competitors, including Sony, and regulators around the world.
The US Federal Trade Commission (FTC) has already moved to block the case on similar competitive grounds, with a hearing scheduled for August.
The CMA began its in-depth investigation in September last year after deciding further work into its implications was warranted.
The regulator said on Wednesday it had given both parties the opportunity to resolve their concerns through possible solutions before a final decision, which could result in the deal being stalled, is made.
This would be announced by April 26, according to the release.
He explained: “The CMA has tentatively found that lessening competition by restricting other platforms’ access to Activision’s games could significantly reduce competition between Xbox and (Sony) PlayStation in the UK, which hurts UK players.
“Xbox and PlayStation are competing with each other right now and getting access to the most important content, like CoD, is an important part of that competition.
“Reducing this competition between Microsoft and Sony could result in all gamers seeing higher prices, reduced range, lower quality, and poorer service on game consoles over time.”
Martin Coleman, who chairs the CMA’s Inquiry Committee, added: “It is estimated that there are around 45 million gamers in the UK, and people in the UK spend more on games than on any other form of entertainment, including music, movies, television and books.
“Strong competition between Xbox and PlayStation has defined the console gaming market for the past 20 years.
“Exciting new developments in cloud gaming are giving gamers even more choice.
“Our job is to ensure that UK players are not caught in the crossfire of global deals which over time could harm competition and lead to higher prices, less choice or less innovation.
“We tentatively found that might be the case here.”
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Microsoft and Activision had until February 22 to submit their responses – including the CMA’s proposed solutions.
Microsoft has always brushed off criticism from regulators, but has made a 10-year commitment to bring Call of Duty, the popular first-person shooter series, to Nintendo and Sony platforms.
This was equivalent, according to Microsoft, to 10 years of parity on everything, including content, price, playability and quality.
Activision replied, “We hope that by April we can help the CMA better understand our industry to ensure it can fulfill its stated mandate of fostering an environment where people can be confident they are getting great choices and fair deals, where competitive, fair businesses can innovate and thrive, and where the whole of the UK economy can grow productively and sustainably.”
Rima Alaily, vice president of Microsoft, said, “We are committed to delivering effective, easily applicable solutions that address CMA concerns.
“Our long-term commitment to grant 100% equal access to Call of Duty to Sony, Nintendo, Steam and others preserves the benefits of the agreement for players and developers and increases competition in the marketplace.
“75% of respondents to the CMA public consultation agree this deal is good for competition in UK gaming.”
