UK’s Competition and Markets Authority (CMA) has announced that it has blocked Microsoft’s pending Activision Blizzard acquisition. The news comes after months of investigation where the UK regulator was set to announce findings on the $68.7 billion Microsoft deal within this week. Though now following CMA’s decision, it appears that the Activision buyout may pose a bigger challenge for Microsoft in the coming months.
Microsoft has been pushing hard to get the green light from regulators over its pending acquisition, particularly with the CMA. Over the past couple of months, the Xbox maker made exclusive 10-year deals with the likes of Nvidia, Nintendo, Boosteroid, and Ubitus in hopes of winning the regulators’ favor. Microsoft even ran full-page ads about its Activision purchase in UK newspapers as part of the company's efforts. While it has seemingly swayed several regulatory bodies in other markets, the CMA has ruled against Microsoft despite the company's best efforts at convincing otherwise.
Following months of analyzing many documents and arguments from stakeholders, the UK's regulator declared that it has blocked Microsoft's acquisition of Activision Blizzard. Last month, CMA issued its provisional findings on the Activision deal stating that it won't substantially lessen "competition in relation to console gaming" and that withholding IPs like Call of Duty from PlayStation would "outweigh any gains." However, at the time the CMA also mentioned that concerns regarding Microsoft's cloud gaming dominance remained. In its final report, the regulator highlights that a major part of its decision to block the deal is due to Microsoft's failure to address CMA's cloud gaming concerns should the acquisition go ahead.
According to the CMA, the Xbox maker already holds 60-70% of the global market share when it comes to cloud gaming services and the regulator believes the deal would only reinforce Microsoft cloud gaming dominance by giving control over franchises like Overwatch, Call of Duty, and Warcraft. The regulator further points out that as per available evidence, "Activision would start providing games via cloud platforms in the foreseeable future" without the merger.
As of now, executives from both Microsoft and Activision have commented on CMA's decision and have stated it will be appealed. Microsoft President Brad Smith claims that "CMA's decision rejects a pragmatic path to address competition concerns" and that it "discourages technology innovation and investment in the United Kingdom." Activision Blizzard CEO Bobby Kotick expressed similar sentiments confirming the company will contest the decision alongside Microsoft. The CEO also indicated that the company has already begun to work on the appeal to the UK Competition Appeal Tribunal.
The UK regulator's decision comes as a huge blow to Microsoft's aggressive push to close the deal. Interestingly, it may face harsher opposition in the US with the FTC's ongoing efforts at blocking the deal. While it was earlier hinted that Microsoft is reportedly going to complete the Activision acquisition without FTC green light, things might turn out more challenging for the Xbox maker. In any case, it will be interesting to see how things pan out for Microsoft as the tech giant continues to double down on its Activision buyout efforts.