The acquisition of Activision Blizzard by Microsoft is facing a variety of legal challenges, as regulatory bodies including the Federal Trade Commission examine whether the proposed $68.7 billion USD deal could breach antitrust laws. Now, one regulator says that selling the entire Call of Duty series and taking the FPS game out of Activision Blizzard’s control could present a possible solution to issues regarding reduced competition and market fairness.
In a public notice, the UK’s Competitions and Markets Authority, which is investigating whether Microsoft’s purchase of Activision Blizzard could reduce competition and choice in the game industry, offers a series of “remedies” to help facilitate the acquisition.
Citing potential issues regarding “substantial lessening of competition” (SLC), the CMA suggests that if Activision Blizzard was to sell the Call of Duty series, it could provide the “structural remedy” required for the deal to be approved.
Other propositions include “divestiture” of the entire “Activision segment” of Activision Blizzard, or divestiture of the Activision and Blizzard segments – essentially meaning that, although Microsoft would own Activision Blizzard, many of its key products, such as World of Warcraft, would need to be sold off in order to avoid breaching anti-competition laws.
“At this stage, the CMA has identified the following possible structural remedies,” the Competition and Markets Authority explains. “Divestiture of the business associated with Call of Duty; divestiture of the Activision segment of Activision Blizzard, Inc… which would include the business associated with Call of Duty; divestiture of the Activision segment and the Blizzard segment…which would include the business associated with Call of Duty and World of Warcraft, among other titles.”
Under structural remedies, the CMA also lists “prohibition of the merger,” suggesting that, if the proposed sales and divestitures are not made, the Microsoft Activision Blizzard deal may be blocked.
“The SLCs we have provisionally found do not relate to the entirety of Activision Blizzard, Inc’s business,” the CMA says. “Therefore, in principle, remedying these SLCs may be achieved by divesting a part of Activision Blizzard, Inc’s activities. Partial divestiture would involve splitting up Activision Blizzard, Inc’s business and divesting a package of assets relating to the provisional SLCs.”
The CMA also says that these remedies would rely on the “identification of a suitable purchaser,” meaning that potential buyers of Call of Duty, or the Activision or Blizzard segments, would need to satisfy certain criteria including being “independent to the parties” and having the “necessary capability to complete.”
Structural remedies, however, are not the only possible solution. The CMA also allows for what it calls “behavioural remedies.” Rather than splitting up the assets and products of businesses proposing to merge, if the CMA is satisfied that a company’s conduct, post-merger, will not breach antitrust regulations, a deal may still be allowed to go ahead.
In the case of Microsoft, Activision Blizzard, and Call of Duty, concern is centred around platform exclusivity, and whether CoD, if it were owned by Microsoft, would be available outside of PC and Xbox. Microsoft has previously said that it would still release Call of Duty on other platforms – the CMA says that this arrangement could serve as a potential part solution to concerns over the proposed acquisition.
“A behavioural remedy would involve Microsoft and Activision agreeing to take certain action(s) post-merger,” the CMA says. “For example, making Call of Duty and other games available to other platforms, in order to remedy the SLCs. The CMA would also need to be confident that the remedy was capable of effective implementation, monitoring and enforcement.”
Ensuring that Call of Duty is available outside of Microsoft platforms will not however be sufficient by itself for the Microsoft Activision Blizzard deal to receive CMA approval.
The regulator says that “the circumstances in which the CMA might select a behavioural remedy as the primary source of remedial action are not present in this case,” meaning that Microsoft and Activision Blizzard will have to consider the proposed structural changes, including selling CoD, as part of further CMA discussions.
Bobby Kotick, CEO of Activision Blizzard, has reportedly sent an email to company staff, discussing the CMA’s statement. “Today, the Competition and Markets Authority in the UK released its provisional findings of evaluating the merger,” says Kotick in the email, obtained by dedicated Call of Duty site Charlie Intel.
“It opens the door to discuss various commitments Microsoft can make to assuage concerns as part of the ongoing dialogue and engagement with regulators. We are listening carefully and look forward to continuing a constructive discussion… as we work toward deal close.
“We are also confident that the law – and the facts – are on our side,” Kotick continues. “When governments look at business transactions like this, they often ask how the landscape will change… 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.”
Microsoft and Activision are invited to respond to the CMA’s proposals, and have until February 22 to do so.