Attendees experience Sony's Call of Duty WW II booth at the E3 Expo in Los Angeles. Britain's antitrust regulator advised Wednesday that Microsoft's proposed take-over of British gaming developer Activision would raise prices and be detrimental to consumer choice and innovation. File photo by Jim Ruymen/UPI | License Photo
Feb. 8 (UPI) -- A $69 billion takeover deal by Microsoft of British game developer Activision was thrown into further doubt Wednesday after the British antitrust regulator ruled it would reduce competition in the market leading to higher prices and fewer choices for the country's gamers.
The preliminary findings of the Competition and Markets Authority investigation also said the deal could stifle innovation in gaming from which British players currently benefit, including the "important" rivalry between Microsoft's Xbox and Sony's PlayStation.
Both currently offer some of Activision's best known games including Guitar Hero, World of Warcraft and Call of Duty, but that could change if the merger goes through, warned the CMA.
The five-month investigation determined that the merger could also make Microsoft even stronger in cloud gaming, stifling competition in this growing market and harming British gamers who cannot afford expensive consoles.
Microsoft already accounts for an estimated 60% to 70% of global cloud gaming services and also has other important strengths in cloud gaming from owning Xbox and Windows -- the leading PC operating system -- and a global cloud computing infrastructure, according to the report.
Buying one of the world's most important game publishers, the CMA said, would reinforce this strong position and substantially reduce the competition that Microsoft would otherwise face in Britain's cloud gaming market.
"Being able to offer popular games will be important for cloud gaming providers to attract users as the market continues to grow and develop.
"The evidence available to the CMA currently indicates that Microsoft would find it commercially beneficial to make Activision's games exclusive to its own cloud gaming service,'' the report said.
The CMA's investigation included site visits and hearings with business leaders at Microsoft and Activision, analyzing over 3 million internal documents from both companies to understand their views on the market, commissioning an independent survey of British gamers, and gathering evidence from other gaming console providers, game publishers, and cloud gaming service providers.
The British regulator's intervention comes two months after the Federal Trade Commission filed a suit to block the takeover.
Microsoft responded with a 37-page filing explaining how the deal would not harm competition, noting that the company publicly pledged to bring Call of Duty to Nintendo if the deal goes forward.
"The acquisition of a single game by the third-place console manufacturer cannot upend a highly competitive industry. That is particularly so when the manufacturer has made clear it will not withhold the game," the filing from Microsoft's legal team read.
Microsoft also said it had offered a 10-year deal to Sony for simultaneous releases of Call of Duty games, but that Sony refuses to accept the deal.
Microsoft signed a deal to acquire Activision, the largest gaming acquisition in history and Microsoft's most expensive ever, in January 2022.
Gaming is the biggest form of entertainment in Britain worth about $5 billion annually, more than is spent on pay TV, video streaming, cinema, music or books.
Thousands of games are available on consoles and PCs, but gamers spend much of their time and money on a handful of so-called AAA games including Activision's Call of Duty.