UK blocks Microsoft acquisition of Activision due to cloud gaming concerns

Activison Blizzard Microsoft deal

The acquisition of gaming titan Activision Blizzard King by US tech giant Microsoft has been blocked by the UK Competition and Markets Authority.

Expanding on its preliminary ruling a few weeks ago, the CMA focused on the cloud gaming market, which it concluded the combined entity would be able to dominate and thus restrict competition. Through its already strong position in PC gaming, as well as ownership of the Xbox platform, Microsoft would have a strong incentive to restrict competitors’ access to Activision games in the cloud, which include online hits such as Call of Duty and Fortnight.

“Gaming is the UK’s largest entertainment sector,” said Martin Coleman of the CMA investigation. “Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games. This means that it is vital that we protect competition in this emerging and exciting market.

“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. 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.”

Microsoft had been given the opportunity to suggest remedies for the CMA’s concerns but its proposal fell short of the mark for the following stated reasons:

  • It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
  • It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
  • It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.

Unsurprisingly neither Microsoft nor Activision agree with the decision, with the latter adopting an especially petulant tone.

It’s hard to know who, if anyone, is in the right with this decision. Any major M&A conducted by a company as big as Microsoft is going to have significant competition implications but it’s a bit surprising Microsoft failed to offer sufficient remedies. This decision was probably influenced by the general climate of suspicion towards big tech and it could have been that, more than any specifics, that swayed the CMA. If so, there seems to be a healthy chance the Competition Appeal Tribunal will push back.


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