The UK competition regulator has blocked Microsoft’s bid to buy Activision Blizzard, the developer of hit video games such as Call of Duty, in what would have been biggest acquisition in video game history.
THE Competition and Markets Authority (CMA) blocked the $68.7bn (£55bn) cash purchase as it feared it would crush the cloud gaming market.
The tie-up would have created a gaming giant, merging Activision’s plethora of “AAA” titles, which also include World of Warcraft, Hearthstone, Candy Crush Saga and Overwatch, with Microsoft’s burgeoning stable of first-party developers, its Xbox consoles and its control of PC games.
The blocking follows the decision of the CMA in october last year to prevent Meta from acquiring the animated gif search engine Giphy.
Anne Witt, a law professor and member of the EDHEC Augmented Law Institute, called Activision’s decision “huge news”.
She said: “The CMA is the only competition agency in the world to ever ban a big tech merger, and now it has done so twice. While the UK is a little behind in terms of platform regulation, the CMA really plays a leadership role in policing big tech mergers.
The regulator’s decision on ActivisionBlizzard had appeared to be tilted in Microsoft’s favor after announcing earlier this month that it was happy with the Seattle-based company’s promises to make Call of Duty available on other platforms for at least a decade. Those promises, he said, preserved competition in the home console market, against protests from PlayStation owner Sony.
But the CMA ultimately concluded that the burgeoning field of cloud gaming, which allows users to stream video games to play on their phone or TV without investing in specialized hardware, was more likely to be distorted if the purchase was authorized.
Microsoft offers a subscription service, Xbox Cloud Gaming, which provides access to several of its first-party titles for a single monthly fee, and it would have been likely to include Call of Duty in the bundle.
Martin Coleman, Chairman of the Independent Expert Panel conducting the investigation, said: “Gaming is the UK’s largest entertainment sector. Cloud gaming is growing rapidly with the potential to change the game by altering the way games are played, freeing people from the need to rely on expensive gaming consoles and PCs and giving them more choices about 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 reinforce that advantage by giving it the ability to undermine new, innovative competitors.”
The regulator concluded that Microsoft’s proposed solutions were insufficient to allow the merger to proceed, as they did not sufficiently cover other cloud gaming business models. He also said they were too focused on protecting competition on consoles, but not on PC gamers who used non-Windows operating systems, such as Mac and Linux.
Activision and Microsoft have the ability to appeal to the Competition Appeal Tribunal. If so, the body should make a final decision before the end of the year.
Microsoft said it would appeal. Brad Smith, its vice-chairman and chairman, said: “The CMA’s decision rejects a pragmatic way to address competition concerns and discourages technological innovation and investment in the UK.
“We have already signed contracts to make popular Activision Blizzard games available on an additional 150 million devices, and we remain committed to bolstering these agreements through regulatory action. We are particularly disappointed that after much deliberation, this decision appears to reflect a misunderstanding of this market and how the cloud technology involved actually works.
A spokesperson for Activision Blizzard said: “The CMA report contradicts the UK’s ambitions to become an attractive country to build tech companies. We will work aggressively with Microsoft to reverse this trend on appeal.
“The report’s findings do a disservice to British citizens, who face an increasingly dire economic outlook. We will reassess our growth plans for the UK. Global innovators big and small will take note that – for all its rhetoric – the UK is clearly out for business. »
In a note to employees posted on SubstackActivision Blizzard General Manager Bobby Kotick said, “This isn’t the news we wanted, but it’s far from the final word on this deal.”