In April 2023, the Competition and Markets Authority (CMA) of the United Kingdom blocked Microsoft’s $69 billion acquisition of Activision Blizzard. The CMA was concerned that the takeover would reduce innovation and choice for gamers in the U.K. Microsoft and Activision Blizzard have appealed the CMA’s decision; the case is ongoing.
The CMA’s decision was based on several factors, including:
- The combined market power of Microsoft and Activision Blizzard in the U.K. gaming market.
- The potential for the deal to lead to higher prices for games and game subscriptions.
- The value could reduce the availability of games on different platforms.
Microsoft and Activision Blizzard have argued that the CMA’s concerns are unfounded. They say the deal will lead to more innovation and choice for gamers in the U.K. They also say they will not raise game or subscription prices.
The CMA’s decision is a setback for Microsoft, but it is not the end of the road for the deal. Microsoft and Activision Blizzard are confident they can overturn the decision on appeal. The case is currently scheduled to be heard by the Competition Appeal Tribunal in September 2023.
It remains to be seen whether the CMA’s decision will have a broader impact on the gaming industry. If the deal is ultimately blocked, it could discourage other large tech companies from making similar acquisitions. However, it is also possible that the agreement will be approved, which would set a precedent for future mergers and acquisitions in the gaming industry.
The U.K. Competition and Markets Authority opposed the deal as it raised competition concerns in the nascent cloud gaming market. The CMA previously held concerns about competition in games consoles being undermined but ruled out this concern in a preliminary decision in March.
The CMA said that Microsoft could make Activision’s games exclusive to its cloud gaming platform, Xbox Game Pass, cutting off distribution to other key industry players.
‘Flawed understanding of this market
Microsoft Vice Chair and President Brad Smith said the company remains “fully committed to this acquisition and will appeal.”
“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,” Smith said Wednesday.
“We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision reflects a flawed understanding of this market and how the relevant cloud technology works.”
‘U.K. is closed for business.’
An Activision Blizzard spokesperson said the CMA’s decision represented “a disservice to U.K. citizens, who face increasingly dire economic prospects.”
“We will reassess our growth plans for the U.K. Global innovators large and small will take note that – despite all its rhetoric — the U.K. is closed for business,” the spokesperson said.
The CMA had raised concerns about the potential for Microsoft to hinder competition in the nascent cloud gaming market via its Xbox Game Pass subscription service, which offers cloud gaming among its perks. Microsoft has committed to bringing new Call of Duty titles to Xbox Game Pass on day one of its release.
Cloud gaming, or accessing games via P.C. or mobile devices over the internet, is still in its infancy and requires a strong broadband connection. Cloud gaming made up only a fraction of global internet traffic in 2022.
Microsoft still needs to convince other regulators not to block the deal. The E.U. is currently investigating the merger to see if it might harm competition. Additionally, the U.S. Federal Trade Commission has filed a lawsuit against the union, citing antitrust concerns and seeking to prevent it from moving forward.