UK regulator blocks Microsoft-Activision merger
The UK’s competition authority has blocked Microsoft’s proposed $69 billion acquisition of gaming company Activision Blizzard, dealing another blow to the troubled merger.
The Competition and Markets Authority (CMA) announced on Wednesday (26 April) that it would not approve the deal after Microsoft’s proposed solutions to earlier concerns raised by the regulator were rejected.
In provisional findings published in February, the CMA warned that the merger would likely harm competition in cloud gaming services and the supply of consoles in the UK market.
The deal has attracted significant regulatory scrutiny in other jurisdictions, including the EU, where an investigation into the acquisition is ongoing. In the United States, the Federal Trade Commission has already sued to block the deal.
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Last September, the CMA launched a formal investigation into the proposed merger, which was announced in January 2022 and would be Microsoft’s largest to date, making it one of the market’s largest gaming companies.
Earlier this year, the authority issued its provisional conclusions, finding that the deal was likely to harm competition across multiple markets, particularly with regard to the availability of Activision’s high-profile games, such as the profitable Call of Duty franchise.
According to the CMA, it would be to Microsoft’s commercial benefit to make Activision’s games exclusive to its own cloud gaming service, an area in which it is already dominant. It also warned that this could stifle innovation and competition in areas such as game consoles and PCs.
UK competition regulator opposes Microsoft-Activision merger
The UK’s Competition and Markets Authority (CMA) has found that Microsoft’s proposed acquisition of gaming company Activision Blizzard could harm competition across multiple markets.
Microsoft submitted several proposed behavioural remedies in response to the CMA’s concerns, which the watchdog said on Wednesday contained significant shortcomings.
These flaws included insufficient coverage of different cloud gaming service business models and insufficient openness to providers wishing to offer games on PC operating systems other than Windows, the regulator considered.
The CMA also took issue with the fact that the remedies proposed standardising the terms and conditions on which games are available, rather than these being determined by market competition, as they would be without the merger.
The authority found that, as the remedy only applies to certain Activision games available on select cloud gaming services through particular online stores, the risk of conflict between Microsoft and cloud gaming service providers was high.
It also concluded that the remedy would inevitably require oversight by the CMA, whereas, in its absence, cloud gaming would instead be shaped by market developments.
The CMA noted certain benefits of the deal, such as Activision’s material being available on Xbox’s Game Pass, but found that this would not outweigh the harm to cloud gaming competition in the UK.
“Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming, and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors,” said Martin Coleman, chair of the independent panel of experts that conducted the investigation.
“Microsoft engaged constructively with us to try to address these issues, and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.”
Both Activision and Microsoft criticised the deal as a blow to UK business.
“The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects,” said an Activision spokesperson.
“We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”
Microsoft’s Vice Chair and President Brad Smith said the company would appeal the ruling, adding that “the CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom”.
“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,” Smith said.
The deal is also facing scrutiny in Brussels. In February, Microsoft announced that it had signed decade-long deals with gaming companies Nintendo and Nvidia to stave off a negative appraisal of the merger by the Commission.
Under the terms of the agreements, Microsoft pledged that players of the other services would receive access to Call of Duty at the same time as those using Xbox, with full feature and content parity, an attempt to allay the Commission’s concerns about potential exclusive provision of Activision content to Xbox users.
Reuters reported last month that Microsoft was expected to win Brussels’ approval for the merger, a decision on which is expected next month.
However, the billion-worth marriage continues to face regulatory challenges in the US, where a Federal Trade Commission hearing on the acquisition is set for 2 August, after the 18 July contractual deadline for the merger to be completed.
Microsoft rallies in Brussels to avoid EU block of Activision merger
Microsoft has signed fresh deals with Nintendo and Nvidia in the hopes of averting a move by the Commission to block its proposed $69 billion acquisition of gaming company Activision Blizzard.
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