Late last month, the UK Competition and Markets Authority (CMA) partially reversed its position on Microsoft’s proposed acquisition of Activision Blizzard. The regulatory body concluded that the transaction is unlikely to harm console gaming competition in the UK based on new data. While Microsoft seems pleased with the CMA’s revised decision, Sony has not taken the announcement well. In a response published today, the Japanese console manufacturer and game industry giant labeled the CMA’s reconsideration “surprising, unprecedented, and irrational.”
Sony vs. CMA: Dissecting the Disagreement
Sony submitted a response to the CMA’s addendum to its provisional findings on March 31, and the document was published today. The company claims that the UK regulator contradicted its aim as stated in the original provisional findings to “assess the Merged Entity’s incentive to foreclose by considering all the available evidence in the round” by focusing on a single model when re-evaluating its conclusions.
Sony’s Concerns Over CMA’s Reversal
While Sony does not contest that Microsoft would not have reason to withhold Call of Duty from PlayStation platforms post-acquisition, it claims that the addendum has not disproved that the Redmond corporation would have the ability to do so or that it could have other incentives to engage in foreclosing behavior. Sony points out numerous alleged conceptual errors in the CMA’s revised lifetime value (LTV) model.
According to Sony, the model understates Microsoft’s gains from withholding Call of Duty from PlayStation platforms by around 70% due to the fact that it does not take into account that highly-engaged Call of Duty players generate greater revenue. It also does not factor in that Microsoft’s losses will be offset by the elimination of royalty payments to Activision and by players switching over from PlayStation platforms for Call of Duty.
Sony disputes the CMA’s conclusion that the Microsoft-Activision deal is unlike Microsoft’s previous acquisitions, claiming that its now-proven withholding of ZeniMax games like Redfall from PlayStation after acquiring the company proves that it will do the same with Activision’s multi-platform franchises.
Microsoft’s Proposed Acquisition and Global Regulatory Review
Microsoft’s proposed acquisition of Activision Blizzard remains under global regulatory review, most notably in the US, the UK, and the EU. However, the latter two appear likely to let the acquisition pass following Microsoft’s recent access agreements with Nintendo, Nvidia, Boosteroid, and Ubitus.
The deadline for the CMA’s final report remains April 26, 2023.
Final Thoughts
The Microsoft-Activision deal has been the subject of controversy and scrutiny from the start, and Sony’s response to the CMA’s revised decision adds another layer to the ongoing regulatory review process.
