UK blocks Microsoft deal with Activision Blizzard
After a torturous verification process, the infamous purchase agreement for Activision Blizzard of $68.7 billion from Microsoft has been dramatically blocked by UK regulators, following months of investigation. The decision was made by the UK Competition and Markets Authority and prevented the purchase primarily due to cloud gaming concerns.
We remain fully committed to our acquisition with @ATVI_AB and will appeal today’s determination by the CMA. Here’s our statement. pic.twitter.com/ylvDP5RUqQ
—Brad Smith (@BradSmi) April 26, 2023
In the final report, the entity stated that ownership of Activision Blizzard by Microsoft risked “stifling competition in this growing market.” However, Microsoft has said it will appeal the decision. In the words of the president of Microsoft, Brad Smith, they say that they are committed to the acquisition.
“We remain fully committed to this acquisition and will appeal. The CMA decision rejects a pragmatic path to address competition concerns and discourages technological innovation and investment in the UK.
We’ve already signed contracts to make popular Activision Blizzard games available on an additional 150 million devices, and we remain committed to strengthening these agreements through regulatory solutions. We are especially disappointed that after lengthy deliberation, this decision appears to reflect a misunderstanding of this market and the way the relevant cloud technology actually works.”
On your part, Activision Blizzard He expressed his opinion through a spokesman in which he called the decision a “disservice to the citizens of the United Kingdom, who face increasingly dire economic prospects.”
“The CMA report contradicts the UK’s ambitions to become an attractive country to build technology businesses. We will work vigorously with Microsoft to reverse this on appeal. The report’s conclusions are a disservice to UK citizens, who are facing increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators big and small will take note: for all their rhetoric, the UK is clearly closed for business.
According to the report, the CMA still has doubts and concerns about Microsoft’s position on cloud gaming. They allege that the company “would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.” They also stated that Microsoft’s large share of the global cloud gaming market was already bringing benefits to Xbox, Windows and Azure; that by having series like Call of Duty, Overwatch and World of Warcraft in its portfolio, competitors would be affected.
In the end, the CMA concluded that blocking the purchase would be the safest option. Here below an excerpt from the final report.
“There are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market.”
“Accepting Microsoft’s remedy would inevitably require some degree of regulatory oversight by the CMA,” the report continued. “On the contrary, avoiding the merger would allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention.”
“The CMA carefully considered whether the benefit of having Activision’s content available on Game Pass outweighed the damage the merger would cause to cloud gaming competition in the UK,” it said. “The CMA found that this new payment option, while beneficial to some customers, would not outweigh the overall damage to competition (and ultimately UK players) arising from this merger, particularly given the incentive for Microsoft to increase the cost of a game. Approve post-merger subscription to reflect the addition of Activision’s valuable games.”
Microsoft already enjoys a powerful position and advantage over other competitors in cloud gaming, and this deal would strengthen that advantage by giving it the ability to undercut new and innovative competitors. Microsoft engaged us constructively in trying to address these issues and we are grateful for that, but their proposals were ineffective in remedying our concerns and would have replaced competition with ineffective regulation in a dynamic new market.
Cloud gaming needs a free and competitive market to drive innovation and choice. The best way to achieve this is to allow the current competitive dynamics in cloud gaming to continue to do their job.”
We’ve prevented @Microsoft from purchasing @Activision over concerns the deal would damage competition in the #CloudGaming market, leading to less innovation and choice for UK #gamers. ☁️ pic.twitter.com/prWcDI7Evt
— Competition & Markets Authority (@CMAgovUK) April 26, 2023