Why Sony says it can’t trust Microsoft’s Call of Duty offer? One word: Bethesda

For months now, Microsoft has sworn up and down that it doesn't want to take the Call of Duty franchise away from PlayStation if and when it finalizes its proposed acquisition of Activision. But Sony is citing the history of Microsoft's acquisition of Bethesda Softworks parent company ZeniMax as a primary reason why it doesn't exactly trust Microsoft on this matter. In a filing with the UK's Competition and Markets Authority (CMA) published last week, Sony pointed to the European Commission's decision to allow Microsoft's acquisition of ZeniMax in 2021. In that decision, the EC cited Microsoft's planned business strategy in concluding that "the combined entity would not have the incentive to foreclose rival console video game distributors by engaging in a total or partial input foreclosure strategy [emphasis added]." In other words, the European Commission said it felt Microsoft would have no reason to withhold future Bethesda games from rival platforms like PlayStation. Shortly after the deal was approved, though, Microsoft seems to have found that "incentive" quite easily. In June of 2021, Microsoft announced that the upcoming Starfield would not be available on PlayStation consoles (a move that led a Bethesda executive to publicly apologize to PlayStation fans). The upcoming Elder Scrolls VI was also confirmed as an Xbox/PC exclusive that November, just over a year after director Todd Howard said such an exclusive would be "hard to imagine." The FTC also noted this portion of the EC report, saying that Microsoft went back on its "assurances" to the EC. Technically, though, that portion of the report was less a promise by Microsoft and more an assumption by the EC based on its reading of Microsoft's own plans. And that implication wasn't key to the European Union's approval of the deal, anyway—exclusivity for Bethesda games "would not have a material impact on competition," the Commission wrote. Still, the whole Bethesda saga has Sony worried that any current promises about long-term cross-platform plans for the Call of Duty franchise might be similarly weak. "[Sony] is extremely skeptical that an agreement with Microsoft could be reached, much less monitored and enforced effectively," the  company wrote to the CMA. "There is no realistic prospect of such an agreement being reached that would maintain effective competition."

A lack of trust

Microsoft's offer of a 10-year binding contract to keep Call of Duty on PlayStation isn't enough to assuage those fears, Sony wrote, as those arrangements "say nothing" about the long-term competition concerns identified by the CMA's provisional findings. As Sony notes, those provisional findings already indicate that "the merged entity’s post-Transaction incentives would be very different from Activision’s current incentives."

Even if the CMA tried to enforce a so-called "behavioral remedy" to keep Call of Duty multi-platform, that move would not "address the myriad ways Microsoft could circumvent its obligations," Sony wrote. Sony also said Microsoft has a "history of non-compliance with behavioral commitments," pointing to Bethesda as well as previous broken commitments regarding Windows and Internet Explorer. Regardless of Microsoft's promises now, owning Call of Duty and other Activision franchises would give Microsoft an important "competitive lever... over PlayStation's fate (for example, by controlling Call of Duty pricing and quality)." In its own filing with the CMA, Microsoft noted once again that it "has no intention of... making Call of Duty exclusive to the Xbox platform" and that its proposed agreements with Sony would mean the PlayStation versions would match those on Xbox "on release date, content, features, upgrades, quality, and playability." Microsoft proposed a monitoring trustee, an objective third-party assessor, and a fast-track dispute-resolution mechanism to help enforce those promises. For Sony, though, it seems there is no enforcement regime or set of magic words that will make the company trust and accept Microsoft's ownership of Activision and Call of Duty. The only solution that Sony would accept is one proposed by the CMA itself: Microsoft fully divesting the Activision or Call of Duty businesses post-acquisition. The CMA is set to make its final decision on the matter by April 26.