UK regulators say Activision Blizzard should be broken up

The UK's Competition and Markets Authority says that if Microsoft is serious about acquiring Activision Blizzard, there's one sure way to make it happen: Break up Activision Blizzard.

The bold suggestion came in a new "notice of possible remedies (opens in new tab)" update, a procedural document that lays out the CMA's concerns, and the various possible ways that Microsoft and Activision Blizzard might address them.

There are two types of "remedies" available in situations like this, the CMA said: Structural, which changes the conditions of the proposed deal, and behavioral, in which the parties involved effectively promise to be good in exchange for getting permission to do what they want. In merger situations, the CMA prefers structural remedies because they "rarely require monitoring and enforcement"—once they're done, there's no going back, so you don't have to worry about getting screwed three or four years down the road.

In the case of the Activision Blizzard acquisition, the CMA cited two possible structural remedies:

• (a) Requiring a partial divestiture of Activision Blizzard, Inc. This may be:
  (i) Divestiture of the business associated with Call of Duty;
  (ii) Divestiture of the Activision segment of Activision Blizzard, Inc. (the Activision segment), which would include the business associated with Call of Duty;
  (iii) Divestiture of the Activision segment and the Blizzard segment (the Blizzard segment) of Activision Blizzard, Inc., which would include the business associated with Call of Duty and World of Warcraft, among other titles.
• (b) Prohibition of the merger.

What that means, basically, is that the CMA will green light the deal if Activision Blizzard sells or splits off some portion of the company or its holdings so Microsoft doesn't gain control of the whole package in the acquisition. That would be a major step, and given that all of Activision Blizzard's divisions carry significant value—Call of Duty, King mobile games, pretty much everything Blizzard does, and a massive back catalog are all very lucrative components of the whole—one that Microsoft will presumably be reluctant to take.

Activision isn't terribly interested in the plan either. "CMA’s proposals don't represent final determinations for the deal," an Activision Blizzard rep said in an email sent to PC Gamer. "Microsoft now has the opportunity to make their case on the path forward. We already know that they want to keep Call of Duty available on all platforms.

"We look forward to addressing the CMA’s concerns and are confident this deal is good for players and good for competition in the gaming industry … We hope between now and April we’ll be able to help the CMA better understand our industry to ensure they can achieve their stated mandate."

As Activision Blizzard said, the CMA notice isn't a final ruling of any sort, but "is intended as a starting point for discussion" between the CMA, Microsoft, and Activision Blizzard. But the fact that a breakup is being floated at all feels like a tipping point: Divestiture isn't an especially uncommon response when proposed mergers face regulatory hurdles (the US Federal Trade Commission has an entire guide on it (opens in new tab)), but as far as I know this is the first time that splitting up Activision Blizzard has been proposed. Will Microsoft still be interested in the deal if it has to give up Call of Duty or World of Warcraft to make it happen? I don't know, but I do know this: If the CMA is pondering the idea, you can bet the FTC is thinking about it, too.

Despite the CMA's seemingly stiffening resistance to the proposed merger, Activision Blizzard CEO Bobby Kotick doesn't appear interested in striking a conciliatory tone. In a recent interview with CNBC he accused regulators of lacking "independent thought (opens in new tab) "and warned that if the deal isn't approved, the UK is "not going to be Silicon Valley, [it'll] be Death Valley."

• SEO Powered Content & PR Distribution. Get Amplified Today.
• Platoblockchain. Web3 Metaverse Intelligence. Knowledge Amplified. Access Here.
• Source: https://www.pcgamer.com/uk-regulators-say-activision-blizzard-should-be-broken-up