The U.K’s antitrust regulator has indicated that it may launch a new antitrust investigation into Microsoft Corp.’s proposed acquisition of Activision Blizzard Inc. for $68.7 billion.

The regulator, the Competition and Markets Authority, announced the development today. 

Microsoft, which is best known for its Windows operating system and cloud services, also operates a multibillion-dollar video game division. Activision Blizzard, in turn, is a major video game developer listed on the Nasdaq. Microsoft’s proposed $68.7 billion purchase of Activision Blizzard will be the largest in the history of the tech industry if it receives regulatory approval.

The CMA began reviewing the deal in July by launching a so-called Phase 1 inquiry. The CMA regularly launches such inquiries to evaluate large acquisitions. Today, the regulator stated that it could soon expand its antitrust review of Microsoft’s proposed Activision Blizzard acquisition by launching a more in-depth Phase 2 investigation. 

In the next five working days, Microsoft and Activision Blizzard can submit proposals to address the CMA’s antitrust concerns. If the regulator determines that the companies’ proposals don’t address its concerns, it will formally begin the Phase 2 investigation. The investigation would see the CMA appoint an independent panel of experts to evaluate the potential antitrust impact of the acquisition.

The CMA is concerned that the deal may reduce competition in the video market. The regulator believes that acquiring Activision Blizzard could enable Microsoft to limit rivals’ ability to compete in the video game console, multigame subscription services and cloud gaming segments. According to the CMA, Microsoft might limit rivals’ access to video games made by Activision Blizzard or provide access under less favorable terms.

Another factor behind the CMA’s decision to raise the prospect of a Phase 2 investigation is that Microsoft is a major player in the cloud and operating system markets. Additionally, the company is a leading maker of video game consoles. The CMA is concerned that Microsoft could use its strong market position in the cloud, operating system and video game console segments to “damage competition in the nascent market for cloud gaming services”. 

“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,” stated Sorcha O’Carroll, the Senior Director of Mergers at the CMA.

Phil Spencer, the Chief Executive Officer of Microsoft’s Microsoft Gaming division, responded to the development in a blog post today. “We will continue to engage with regulators with a spirit of transparency and openness as they review this acquisition,” the executive wrote. “We believe that a thorough review will show that the combination of Microsoft and Activision Blizzard will benefit the industry and players.”

Photo: Microsoft