UK Regulators Block Microsoft’s Acquisition Of Activision Blizzard Over Cloud Gaming Concerns

Microsoft’s $68.7 Billion acquisition of Activision Blizzard has been blocked by the Competition and Markets Authority (UK), a regulatory body that performs the same functions as the Federal Trade Commission does in the U.S. 

It’s a bit shocking to hear this news, since many people predicted that CMA will approve this deal. However, while it is an obstacle for Microsoft to move forward with this purchase, it doesn’t mean this will be the final decision. Microsoft has said that it is committed to the acquisition, and plans to appeal CMA’s decision. 

In its announcement, the CMA cites concern that “the acquisition would change the future of the rapidly growing cloud gaming market and lead to less innovation and choice for UK players in the coming years.” 

The report continues: “The decision to stop the deal was made after Microsoft’s solution did not effectively address concerns raised by the Competition and Markets Authority in its provisional findings, published in February.” Microsoft has a dominant position in the cloud gaming sector, and evidence provided to CMA indicated that Microsoft’s cloud gaming service would be able to benefit from exclusive Activision games.

In the same announcement, it is stated that this merger “would strengthen Microsoft’s competitive advantage on the gaming market, by giving Microsoft the control of important content like Call of Duty Overwatch and World of Warcraft”, and that evidence “available to the CMA” indicates that Activision, without the merger, would begin providing games over cloud platforms “in the near future”. 

Microsoft submitted a proposal before this block to try and address the CMA concerns, but it ultimately failed to convince the agency. Microsoft’s proposed solution had “numerous significant flaws” that were related to the fast-paced and growing nature of cloud gaming. 

• This document did not cover all the business models for cloud gaming, which includes multigame subscription service.
• The providers of PC games other than Windows were not given enough freedom to do so.
• This would allow the availability of all games to be standardized, instead of being based on the creativeness and the dynamic of the competitors in the marketplace, which would normally occur in an absence of a merger.

Microsoft released a statement about today’s announcement, citing that it is disappointed the decision seemingly reflects a flawed understanding of the video game (and cloud gaming) market. The company will appeal against the ruling. Microsoft has released a statement in its entirety from Vice Chairman and President Brad Smith. 

We are committed to the acquisition, and will file an 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.

Microsoft will still have to deal with the Federal Trade Commission in the United States, which, just like the CMA can block or approve the transaction. 

What does this mean for Microsoft’s impending acquisition of Activision Blizzard, according to you? Tell us in the comments!