The Competition and Markets Authority warned that restricting the access that other platforms have to Activision’s games could substantially reduce the competition between Xbox and PlayStation in the UK.
The watchdog said the move could alter the future of gaming, potentially harming UK gamers, particularly those who cannot afford or do not want to buy an expensive gaming console or gaming PC.
It follows a 5-month investigation into the deal by the CMA, in which it analysing over 3 million internal documents from the two businesses and commissioned an independent survey of UK gamers.
Martin Coleman, chair of the panel of experts conducting the CMA investigation, said: “Our job is to make sure that UK gamers are not caught in the crossfire of global deals that, over time, could damage competition and result in higher prices, fewer choices, or less innovation. We have provisionally found that this may be the case here.
“We have also today sent the companies an explanation of how our concerns might be resolved, inviting their views and any alternative proposals they wish to submit.
An Acitivision spokesperson said in response: “These are provisional findings, which means the CMA sets forth its concerns in writing, and both parties have a chance to respond.
“We hope between now and April we will be able to help the CMA better understand our industry to ensure they can achieve their stated mandate to promote an environment where people can be confident they are getting great choices and fair deals, where competitive, fair-dealing business can innovate and thrive, and where the whole UK economy can grow productively and sustainably.”
In a memo to staff, Activision Blizzard CEO Bobby Kotick said: “We are...confident that the law – and the facts – are on our side.”
The regulator first began its probe into the acquisition in September on grounds that the deal could damage the video games market by blocking access to Activision’s games or giving access on unfavourable terms. It said the Seattle-based X-box maker failed to offer reassurances to address competition concerns.
The maker of Xbox rivals PlayStation has also sounded the alarm on the merger’s potential to hurt competition in the games industry.
Jim Ryan, the boss of PlayStation owner Sony Interactive Entertainment said: “I feel the need to set the record straight…Microsoft has only offered for Call of Duty to remain on PlayStation for three years after the current agreement between Activision and Sony ends.”
Microsoft vice president Brad Smith hit back at those concerns, telling the Reuters news agency: “We want people to have more access to games, not less,” adding he was committed to making Activision’s latest Call of Duty release “available on the same day on both Xbox and PlayStation.”
Xboss boss Phil Spencer said in December he would bring the Call of Duty franchise to Nintendo consoles if the merger is approved, in a bid to appease concerns by the competition watchdog.
The £57 billion deal, which was first announced in January, is set to close in June 2023 if it clears regulatory hurdles. Microsoft is understood to face a $3 billion break-up fee if the deal falls through.