The UK’s Competition and Markets Authority (CMA) is launching a dual investigation into Microsoft’s proposed acquisition of video game maker Activision Blizzard and Amazon’s competitive practices related to its Marketplace platform.
In January 2022, Microsoft announced plans to acquire Activision Blizzard for $68.7 billion, potentially The biggest in Microsoft history the acquisition is $26 billion more than the company paid for LinkedIn in 2016.
July 6, 2022 CMA started inviting views on a deal with a deadline of July 20. The CMA has tentatively set itself a September 1 deadline for it to either approve the deal or initiate a more in-depth review of the second phase.
Earlier this month, Linda Hahn, chairwoman of the US Federal Trade Commission (FTC), did too confirmed that the agency is “examining the impact on competition in all relevant markets for possible enforcement action.”
The acquisition immediately came under scrutiny due to a lawsuit filed by the California Department of Fair Employment and Housing in July 2021, which cited “multiple complaints of harassment, discrimination and retaliation” at the company.
However, the CMA says it will not investigate the workplace culture at Activision Blizzard, focusing instead on whether the deal will reduce competition in the UK.
Why are the CMA and FTC investigating?
Lewis Ward, research director for games, esports and VR/AR at IDC, said that given the size of the deal, it should not be surprising that agencies in various countries are considering the competitive implications of the proposed buyout.
While regulators are likely concerned that Microsoft might start making some of Activision’s or Blizzard’s popular games exclusive to its Xbox or Windows PC platforms, he doesn’t believe that will be the case since Activision’s huge franchises like Call of Duty, will remain available across all different gaming platforms indefinitely.
“Call of Duty has been the number one grossing console franchise for the past decade, so it’s understandable that regulators want a better understanding of plans for its future to ensure gamers aren’t forced to buy Xbox hardware or Windows 11+ PCs to play the game “, he said.
If the authorities are confident that these titles will be available on various platforms indefinitely, Ward sees no reason why the deal will not ultimately be approved.
“We will cooperate fully with the CMA in the merger review,” said Lisa Tanzi, Microsoft’s corporate vice president and general counsel. “We expect and believe it is appropriate that regulators take a close look at this acquisition. We’ve made it clear how we plan to run our game business and why we believe the deal will benefit gamers, developers and the industry.” It remains confident the deal will be completed in fiscal 2023, as originally planned.
Amazon Marketplace under the microscope
The deal is not the only current investigation into a major technology company by the CMA. It was announced only on July 5 an investigation into the Amazon UK Marketplace platform.
The investigation will focus on three competitive areas: how Amazon’s retail business uses non-public data from third-party sellers, how Amazon sets criteria for choosing which product offerings are included in the Buy Box, and which sellers can list Amazon Prime-branded products on its Marketplace in Great Britain.
A decision date for that investigation has not been announced.
Reforming the UK’s digital competition laws
Earlier this week, EU lawmakers officially passed the Digital Markets Act which, in part, allows expanding the range of antitrust actions and strengthens the rules of digital competition.
In 2019, the expert group led the review into UK digital competition laws, recommending new rules. “Digital markets will only work well if they are supported by strong pro-competitive policies that open up opportunities for innovation,” the review concluded.
UK Government published by Bel in 2021 outlined a new ‘pro-competition regime’ for digital markets and launched a consultation on a new set of proposals. A a response was published in May 2022, which looked at “wider competition reforms” and made a number of proposals which the government said would help “enhance competition and protect consumers more broadly in digital markets”. The findings eventually formed a draft of the Digital Markets, Competition and Consumers Bill.
However, when the government set out its legislative agenda when parliament reopened four days after the response was published, no schedule has been outlined the government for introducing new legislation to the parliament.
Prime Minister Boris Johnson’s resignation this week, accompanied by news that no major new legislation will be passed until a new leader is appointed, means the bill now faces further delays.
I write for the Center for European ReformsZac Myers, senior research fellow at CER, said “if the UK lags behind in tech regulation, UK tech startups may prefer to grow in the EU, where the Digital Markets Act will make life easier for them.”
Meyers also noted that if the US adopts digital competition reforms, they will likely mirror the Digital Markets Act rather than the UK’s proposals, meaning the UK could ultimately lose global influence.
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