MS-Blizzard Merger at Risk of Collapse Due to UK Competition Authorities' Intervention

CMA Declares War on MS: "Correct Antitrust Issues Within 5 Days"

(Photo by Bloomberg)

[Asia Economy Reporter Yujin Cho] The UK competition authority, which has been conducting an antitrust investigation into the Microsoft (MS) and Activision Blizzard merger, has warned MS to correct antitrust behaviors or prepare for further investigation within 5 days. If MS fails to present sufficient measures to resolve antitrust concerns within this period, it is expected to face stronger regulations, including in-depth investigations and possible cancellation of the acquisition.

On the 1st (local time), major foreign media reported that MS's decision to acquire Blizzard for $68.7 billion is at risk of being blocked due to an investigation by the UK competition authority, the Competition and Markets Authority (CMA).

Since the announcement of the MS and Blizzard merger, the CMA began a preliminary investigation in July and recently completed it, notifying MS to prepare corrective measures regarding antitrust behavior and competition reduction within 5 days. The industry interprets this as the start of a full-scale in-depth investigation into antitrust allegations. If MS fails to prepare sufficient measures to comply with competition regulations during this period, the acquisition could be at risk of cancellation.

The core issue is whether the merger constitutes an abuse of monopoly position in the game distribution market. MS, which expanded its business into the gaming industry by launching the 'Xbox' console game in 2001, has raised concerns that it could disrupt fair competition with competitors by leveraging its dominance in the PC market.

The CMA has previously stated that "the merger between the two companies could threaten competition in the console game industry, including Sony, as well as in subscription services and the cloud gaming market." MS could abuse its market position by exclusively releasing blockbuster Blizzard games on its game subscription service 'Game Pass' and blocking other game companies from entering platforms like Wii and PlayStation. The CMA stated, "MS could harm other game companies through popular Blizzard games such as 'Call of Duty' and 'World of Warcraft.'"

As the game distribution paradigm shifts toward a subscription model similar to Netflix, there are also concerns that this investigation will have a broad impact on MS's abuse of market dominance and changes in the market landscape.

Foreign media report that the UK authority's antitrust issue is only the starting point, and MS is also exposed to antitrust investigations by other regulatory bodies in the US, Europe, and elsewhere. MS's acquisition of Blizzard requires approval from competition authorities in major countries including the US, UK, and South Korea.

Earlier this January, MS completed the largest acquisition in the information technology (IT) industry by acquiring Blizzard for $68.7 billion. With this acquisition, Blizzard rose to become the world's third-largest game company by revenue, following China's Tencent and Japan's Sony.