Microsoft acquisition of Activision Blizzard blocked by UK’s CMA

Despite recent signs that it was softening its stance on Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard, the U.K.’s antitrust regulator, the Competition and Markets Authority, has announced that it has decided to formally block the deal.

The CMA said its decision was motivated by concerns about the deal’s effect on the future of the nascent cloud gaming market, where Microsoft is a key player. It feared the deal would lead to “reduced innovation and less choice for UK gamers over the years to come.”

It said that a solution proposed by Microsoft “had significant shortcomings and would require regulatory oversight by CMA.”

“Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service,” the government body said, announcing the findings of its months-long review.

It reckons Microsoft “accounts for an estimated 60-70% of global cloud gaming services” already, thanks to the advantages of owning Xbox, Windows, and the Azure platform, as well as the Game Pass game subscription service to which Xbox Cloud Gaming is tied. The CMA views cloud gaming as an important, fast-growing sector of the games market that allows gamers to “avoid buying expensive consoles” and presents them with more “flexibility and choice as to how they play.”

The CMA viewed the “behavioral” remedies proposed by Microsoft, in the form of 10-year deals forcing it to make its games available to other cloud platforms, as insufficient. The CMA said that the “behavioral” remedies proposed by Microsoft, in the form of 10-year deals forcing it to make its games available on other cloud platforms, were not sufficient.

Microsoft and Activision Blizzard immediately said they would appeal the CMA’s decision.

Responding in a statement, Microsoft president Brad Smith said, “We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom. We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”

A spokesperson for Activision Blizzard responded with a response that was even more stinging, and almost threatened. “The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses,” it said. “We will work aggressively with Microsoft to reverse this on appeal. The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We’ll reassess the growth plan for UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”

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