In the context: While Microsoft and Activision are keen to merge and start operating as a single company, regulators could delay the completion of their merger for a long time. The FTC is already looking for anti-competitive practices in the US. Now the CMA in the UK has opened a similar investigation into the matter in its jurisdiction. While such investigations are routine, they can drag out the approval process for months or even longer.
Microsoft has faced another hurdle in its attempt to acquire Activision Blizzard. Wednesday UK Competition and Markets Authority (CMA) launched official investigation into record $68.7 billion deal. announced in January. The regulator is concerned that the acquisition could violate UK antitrust laws and create an anti-competitive market.
“The Competition and Markets Authority (CMA) is considering whether it is or could be that this transaction, if carried out, would create an appropriate merger situation in accordance with the merger provisions of the Enterprises Act 2002 and, if so, can the creation of such a situation be expected to result in a significant reduction in competition in any market or markets in the United Kingdom in respect of goods or services.”
The CMA believes vigilance is necessary given that Microsoft is the third largest technology company and Activision Blizzard is the fifth largest gaming company. The deal also follows the Redmond giant’s recent $7.5 billion ZeniMax deal. purchase. A successful acquisition by Activision would mark a significant consolidation of the gaming industry under Microsoft’s umbrella, making it the third largest gaming company in the world after Tencent and Sony.
There is nothing surprising in the investigation. The CMA will generally consider any merger when the acquired company’s gross income exceeds £70 million or if the purchase gives the acquirer 25 percent or more of the market in any given sector. Activision net income in 2021 was $8.8 billion. This is £7.4 billion, well above the CMA’s overall threshold to open an investigation.
The CMA investigation will delay the acquisition until at least September 1, when the regulator decides whether to approve the deal or move on to a second phase of the investigation. In the meantime, the CMA will accept comments on the merger from interested parties. Expect consumer watch groups to chime in loudly.
US Federal Trade Commission initiated an investigation in February for similar reasons that identified many watchdog groups, including Public Citizen, Center for Digital Democracy, Communications Workers of America, The Repair Association, Public Knowledge, and the American Economic Liberties Project. They are fear the merger would hinder Activision’s unionization efforts and would have “horizontal anti-competitive effects” in the industry.
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