Microsoft announced its nearly $69 billion purchase of massive gaming company, Activision Blizzard in January. But the road to acquisition hasn’t been smooth for the two companies, and the deal isn’t sealed yet.
Now, another speedbump has appeared. The Competition and Markets Authority (CMA), a United Kingdom regulatory agency, is undertaking a formal investigation into whether or not the purchase would be anticompetitive, and violate antitrust laws in the UK.
CMA investigations work in stages, and today’s announcement marks the start of Phase 1. “Any interested party” is invited to comment on the proposed Microsoft/Activision deal between now and July 20. From there, a decision about whether to move the investigation up to Phase 2 will be announced on September 1.
“The Competition and Markets Authority (CMA) is considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services,” said the inquiry announcement.
And in less impenetrable legal-ese language: Regulators are trying to decide if Microsoft, the third largest tech company, buying and merging with Activision Blizzard, the fifth largest gaming company, would push others out of the market. I.e. would it mean a monopoly?
For context, if the deal were to go through it would be one of the largest tech mergers ever. Activision Blizzard is the company behind generation-defining gaming hits like the Call of Duty franchise, World of Warcraft, and even Candy Crush. Meanwhile, Microsoft already has Xbox. With Activision under its belt, the company would—by its own admission—become “the world’s third-largest gaming company by revenue, behind Tencent and Sony.”
It’s been clear from the start that there would be antitrust concerns, so the UK announcement is no surprise. The threshold for a CMA investigation is reached when either the UK gross revenue of the company being acquired exceeds £70 million, or when the resulting company would account for 25% or more of all UK sales in that sector. The U.S. Federal Trade Commission started up its own investigation months ago. So far, no findings from either probe have been announced. However, either regulatory agency could shut down the deal, or demand that it be downsized in some way.
Beyond the possibility of an anticompetitive gaming monopoly though, Activision Blizzard has faced lots of other recent problems. The California Department of Fair Employment and Housing sued the company in 2021 following a years long investigation that revealed many stories of sexual harassment and abuse. Since that lawsuit, even more former employees have stepped forward with claims. And Bobby Kotick, the company CEO, reportedly knew about the allegations of abuse at his company for years without addressing them.
Then there’s been the tumultuous labor rights push, in which workers said Activision Blizzard engaged in union busting. The company’s employees did successfully vote to unionize in May. However, the status of that union is a little tenuous given the planned purchase. Microsoft has publicly agreed to be “labor neutral” starting 60 days after the acquisition is finalized.