Regulatory Concerns Raised By The U.K. About Microsoft Deal Hurt Activision Stock

An independent investigation into Microsoft's acquisition of Activision Blizzard by the United Kingdom's antitrust regulator, Energy and Competition Authority, has indicated that the deal may upend European gamers and result in higher prices, fewer choices, or less innovation for people in the United Kingdom who are gamers.”

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The Competition and Markets Authority (CMA) has published provisional findings suggesting that it could have a detrimental effect on competition within the gaming industry in the cloud and console sectors if the deal goes through. If it does, it could weaken competition within both markets.

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There was also a statement that said the deal would "pose a serious threat to the gaming community that cannot afford expensive gaming consoles."

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Activision ATVI –2.25%  is a video game company whose shares have fallen 3.2% in recent trading to $73.21. On the other hand, Microsoft climbed 3% to $275.56, a gain of 3%.

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There was an email sent by Activision's CEO Bobby Kotick to employees on April 28 indicating that the investigation was provisional and that it would be addressed to the employees soon. It should be noted that such investigations are part of the evaluation process for such companies and that the company is listening carefully to both sides and looks forward to having constructive discussions as we close the deal with both sides.

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A Microsoft spokesperson confirmed that the company, led by Deputy General Counsel Rima Alaily, is committed to addressing the concerns and will ensure that all customers have 100% equal access to Microsoft services.

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It has also been alleged that it would harm competition as a result of the deal, which is being blocked in the United States by the Federal Trade Commission. According to the FTC, Microsoft is capable of manipulating Activision's pricing, degrading Activision's quality and player experience on rival consoles, or withholding content completely from competitors, as demonstrated by the FTC in December of last year.

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Earlier this month, the filings made public by the FTC revealed that the first round of hearings on the lawsuit will begin in August.

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As announced in January last year, Microsoft has reached a deal with Cisco for an all-cash value of $69 billion. The US videogame industry in 2021 is expected to generate $8.5 billion in revenue, a small fraction of the $184.4 billion total market for videogames, but Activision is one of the largest publishers of videogames. There is no doubt that Call of Duty is the company's most popular product.