The CMA is flexing its muscles and taking aim at Microsoft’s Activision Blizzard deal. About time

The $68.7bn tie-up could be derailed by the CMA’s impending decision over competition concerns. It could be a rare win for the consumer if the watchdog stands firm and presses ahead, writes James Moore

Microsoft’s proposed $68.7bn takeover of Activision Blizzard is in CMA’s crosshairs (PA)

Microsoft’s $68.7bn (£59.5bn) acquisition of Activision Blizzard, the gaming giant behind the World of Warcraft and Call of Duty franchises among other things, has a big red question mark looming in the air above it with lasers at the ready.

The Competition & Markets Authority (CMA) last week voiced concerns that the proposed tie-up could “substantially lessen competition in gaming consoles, multi-game subscription services, and cloud gaming services” after completing phase one of its investigations.

The company has until later this week to answer its objections. Another week, and we’ll know whether the watchdog is worthy of that name. That will be when it announces whether or not it intends to launch a full phase two probe.

Its initial concerns are entirely understandable. Microsoft is responsible for the Xbox console, cloud platform Azure and Windows OS, the leading PC operating system.

Put that lot together with two of the biggest gaming franchises on the planet, not to mention Diablo, Overwatch, Hearthstone, and the rest, and it doesn’t take an Oxbridge double first in economics and law to see the problem.

If Microsoft gets its hands on those games, it could use them to drive people to its various platforms at the expense of its rivals. If you can only play your favourite franchise through Microsoft, then it’s Microsoft products you will buy and Microsoft subscriptions you will take out. Subscriptions being all the rage. Gotta love those recurring revenues!

One only needs to look at the entertainment industry to see this in action.

Disney has an unbeatable roster of entertainment franchises. It used to license some of them for streaming via Netflix. Once Disney Plus was in the works, however, they were taken back.

As the exclusive venue for Marvel, Star Wars, Pixar, Disney animation et al, Plus subscriber numbers exploded from a standing start. Sooner or later, it will seize the number one slot from Netflix. Content is king.

The similarities with gaming are obvious. But no, said Microsoft, which was given five working days to respond to the CMA’s objections.

“Sony, as the industry leader, says it is worried about Call of Duty, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation. We want people to have more access to games, not less,” said Microsoft president Brad Smith in a statement.

The group also intimated that its primary interest in acquiring Activision, which has the 10-year-old Candy Crush Saga under its aegis, was for its expertise in mobile games, where it is weak.

Well, phew, that’s alright then.

But what about the future? And future franchises? Other games? What about mobile, while we’re at it?

This is a huge deal, with huge implications. It is of sufficient size that it ought to be thoroughly scrutinised. Call of Duty? Not to put it through a full investigation almost represents a dereliction of that.

Yet too few of these deals are. They are announced in a blaze of publicity “subject to regulatory approval”, which inevitably means the approval of a bevvy of different international watchdogs, especially in the tech space where borders can seem almost irrelevant to the businesses involved.

Analysts inevitably express their confidence that the deal will secure this. Lobbyists go to work with politicians behind the scenes and, hey presto, the analysts are proven correct.

Sometimes a regulator somewhere likes to cause a bit of fuss, to remind everyone that they exist as much as anything else. Concessions amounting to a banana or two are duly offered up. And the deal gets signed off.

The interests of the end consumer – so us – rarely get a look-in, except maybe in the acquiring company’s press release, which invariably says, ”Bro, don’t worry! This’ll be great for you punters!” Even when it’ll be anything but.

If you want to know how big tech got so big in the first place, this helps to explain why. It is now so big that the big guns can now gobble up potential competitors before they get the chance to become competitors, strangling the innovation they’re always banging on about in the process. Bigger deals push them into new areas, strengthen their dominance.

Recently, however, there have been signs of change in the air. The Biden administration has looked more sceptically at the industry. The EU has flexed its muscles. Then there’s the CMA.

The CMA recently tried to unwind the $400m acquisition of Giphy, an online database and search engine for gifs, by Facebook/Meta, arguing that the latter could try and pull its services from competitors or squeeze them to submit more data under those ever malleable T&Cs. It also voiced concerns about Giphy’s ad services further bolstering Meta’s dominance in that sphere.

The inevitable appeal saw the deal kicked back to the watchdog for reconsideration, where it currently remains. A final decision is expected later this year when we’ll see just how much appetite for playing tough the CMA has.

It is to be hoped that it remains strong. The one question that is almost never asked regarding corporate deal-making? Is this a good thing for the end consumer? Will this work for them?

Competition watchdogs tend to be hemmed in by narrow remits and legalistic structures, even those with ambitions to move past box-ticking. Most have shown little sign of having those and the end consumer suffers as a result. Just how much is becoming increasingly obvious with respect to tech but it’s there in other fields too, should you care to look for it.