The U.K.’s Competition and Markets Authority isn’t convinced Microsoft should buy Activision Blizzard, for the sake of competition in the game industry. Don’t get it twisted, though: The acquisition isn’t even close to flopping, but regulators will likely keep Microsoft tied up in review until well into 2023.

The CMA is putting more pressure on the deal. On Thursday, the agency asked Microsoft to respond to its concerns over the acquisition within five business days.

• If Microsoft isn’t able to appease the CMA by then — a tall task, given the scope of the agency’s concerns –- the U.K. regulator plans to start a so-called Phase 2 review that could last months. Keep in mind the CMA isn’t the only team of regulators looking into the merger; the FTC and the EU are conducting their own probes as well.
• The CMA doesn’t want Microsoft to gain an anticompetitive edge over gaming rivals. It’s particularly concerned that Microsoft would put PlayStation owner Sony at a disadvantage, given that it would own popular properties like Call of Duty and World of Warcraft, as well as other services like its Xbox console business and Game Pass subscription service.
• Activision Blizzard CEO Bobby Kotick and Xbox chief Phil Spencer wrote separate letters trying to address the concerns. Kotick told employees that he’ll hold town halls throughout the fall updating the company on the status of the deal, while Spencer reiterated Microsoft’s pledge to keep Call of Duty available on competing PlayStation platforms.

That additional review doesn’t mean the deal won’t go through; it could just mean the conversations required to get this acquisition cleared are getting more serious.

• While Microsoft has pledged publicly to remain fair and balanced in its treatment of big Activision game series like Call of Duty, a Phase 2 review could involve much more in-depth negotiations with the CMA that result in formal commitments and merger conditions.
• Microsoft set a June 2023 deadline for closing the deal, and it may need the next nine months to hash out all the fine details of the merger with the CMA, the FTC and the EU.
• “We will continue to engage with regulators with a spirit of transparency and openness as they review this acquisition,” Spencer wrote in yesterday’s blog post. “We respect and welcome the hard questions that are being asked.” And at this point, Microsoft doesn’t have much of a choice.

— Sarah Roach