Microsoft’s $69 billion acquisition of Activision Blizzard took a major blow today after the UK’s antitrust watchdog blocked the deal. In a statement, the Competition and Markets Authority (CMA) said the deal could “alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”
According to the CMA, Microsoft controls around 60 to 70 percent of the global cloud gaming market. Offering its blockbuster title, Call of Duty, on rival platforms is not enough reason to grant the acquisition. Microsoft plans to appeal the decision, but major doubts exist that the deal will eventually go through.
“Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service,” says the CMA.
Microsoft faces a tough battle to seal the deal and is still waiting for decisions from the European Commission and on the home front in the US after the Federal Trade Commission (FTC) took the case to court to block the acquisition. After examining new evidence, the CMA’s initial investigation largely focused on the console gaming market but narrowed its scope to cloud gaming. The UK antitrust watchdog is concerned that Microsoft’s acquisition of Activision Blizzard will make its position stronger in the market by controlling Call of Duty, Overwatch, and World of Warcraft titles. The regulator believes Activision Blizzard has the capacity to start offering games on the cloud in the future without merging with Microsoft.
In a statement issued after the CMA announced its position, Microsoft Vice Chair, and President Brad Smith said: “We remain 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.”
In a note to employees, Activision’s chief executive officer, Bobby Kotick said, “We’ve already begun the work to appeal to the UK Competition Appeals Tribunal. We’re confident in our case because the facts are on our side, this deal is good for competition.”
The European Commission will give its own verdict about the acquisition on May 22nd, while the FTC court hearing is scheduled for August.