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The UK competition regulator has dropped a key concern about the impact of Microsoft’s $75bn acquisition of video game maker Activision Blizzard on rival Sony, clearing a substantial roadblock to approving the deal.
After reviewing what it called “new evidence”, the Competition and Markets Authority said on Friday it no longer believes there is a risk of a “substantial lessening of competition” in the console market from the maker of Xbox consoles taking over the publisher of the bestselling Call of Duty franchise. The CMA is still investigating the impact on competition in cloud gaming, which is also now the EU’s main focus.
The surprise reversal by one of the world’s most aggressive antitrust bodies will ease the path to Microsoft closing the deal. It leaves the US Federal Trade Commission — which filed to block the deal in December — as its largest remaining regulatory barrier.
Just last month, the CMA had dealt a serious blow to Microsoft’s hopes of closing the deal, saying it believed the software giant would be motivated to limit Call of Duty’s availability on Sony’s PlayStation. Its provisional findings suggested that Microsoft would have to sell off the Call of Duty business for it to clear the deal, a remedy that the company has ruled out as unviable.
The CMA’s abrupt turnround comes after Microsoft accused the agency of making mistakes in its financial modelling, which undermined its assessment that the company would be motivated to cut off console rivals’ access to the game.
Microsoft said earlier this month that there had been “clear errors in the figures being used to value the small number of Sony customers who might move to Xbox in the absence of Call of Duty”.
Martin Coleman, chair of the independent panel conducting the CMA’s investigation, defended the U-turn. “Provisional findings are a key aspect of the merger process and are explicitly designed to give the businesses involved, and any interested third parties, the chance to respond with new evidence before we make a final decision,” he said in a statement.
One leading antitrust lawyer said: “This is a very unusual development. In CMA-era cases, there has only been one other occurrence of ‘updated’ provisional findings that I’m aware of.”
“This is extremely unusual,” said an ex-CMA lawyer. “Restating your provisional findings is something you would rather die than do.”
Microsoft said on Friday: “We appreciate the CMA’s rigorous and thorough evaluation of the evidence and welcome its updated provisional findings . . . We look forward to working with the CMA to resolve any outstanding concerns.”
The CMA said on Friday it had received a “significant amount of new evidence in response to its original provisional findings” that indicated any move by Microsoft to withhold Call of Duty from PlayStation to make it exclusively available on Xbox would be “significantly lossmaking under any plausible scenario”.
“The CMA’s updated provisional findings show an improved understanding of the console gaming market and demonstrate a commitment to supporting players and competition,” Activision Blizzard said. “Microsoft has already presented effective and enforceable remedies to address each of the CMA’s remaining concerns.”
The CMA is still investigating the potential impact on cloud gaming, where it has said Microsoft could be motivated to make Activision Blizzard games exclusive to Game Pass, its subscription service.
In recent weeks, Microsoft has struck agreements with Nvidia, Ubitus and Boosteroid to distribute Activision Blizzard’s games on their cloud gaming services.
Additional reporting by Javier Espinoza
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