Britain’s antitrust regulator, the Competition and Markets Authority (CMA), has blocked a multi-billion dollar takeover deal that would have seen Microsoft acquire Activision Blizzard. The CMA made the announcement on Wednesday, stating that the deal would harm competition in the cloud gaming market and reduce innovation and choice for UK gamers for years to come. The decision has major implications not only for Microsoft and Activision Blizzard but also for the wider gaming industry and antitrust regulators globally.
Competition Concerns
Microsoft announced its intention to acquire Activision Blizzard in January 2022 for $68.7 billion. However, the deal immediately raised competition concerns, with the CMA being one of the first competition agencies to flag its concerns about the deal in July 2022. It was followed by European competition regulators in November, and the US Federal Trade Commission (FTC) in December.
In February 2023, the CMA tentatively ruled that the acquisition raised competition concerns and could harm UK players. The regulator stated that the deal could result in higher prices, less choice, or less innovation for UK gamers. In an effort to address these concerns, Microsoft offered Sony and Nintendo a 10-year contract for the same release dates for “Call Of Duty” on their respective platforms as on its Xbox platform. The CMA initially sided with Microsoft over Call of Duty concerns on PlayStation last month, but Sony was not happy with the reversal of the CMA’s position.
Block Decision
The CMA has now decided to avoid Microsoft’s proposed purchase of Activision, citing concerns that the deal would disrupt the future of the fast-growing cloud gaming market, leading to reduced innovation and fewer choices for gamers in the UK. The regulator noted that Microsoft already accounts for approximately 60 to 70 percent of cloud gaming services globally and has other major strengths in cloud gaming. Therefore, the acquisition would strengthen Microsoft’s position, giving it the ability to undercut new and innovative competitors, according to Martin Coleman, chairman of the independent panel of experts carrying out this inquiry.
The CMA said Microsoft had submitted a proposal to address some of these concerns, which the regulator examined in considerable depth. However, the proposed remedy failed to effectively address concerns in the cloud gaming sector, according to the CMA. The regulator said the remedy would replace competition with ineffective regulation in a dynamic new market, and avoiding the merger would allow market forces to continue to operate and shape cloud gaming development without regulatory intervention.
Appeal by Microsoft
Microsoft has responded by saying that it remains fully committed to the settlement and will appeal the decision. The software giant’s President Brad Smith tweeted Microsoft’s response, stating that the company was “particularly disappointed that after lengthy deliberation, this decision appears to reflect a misunderstanding of this market and the way relevant cloud technology actually works.”
Conclusion
The CMA’s decision to block Microsoft’s proposed acquisition of Activision Blizzard has major implications for both the companies and the wider gaming industry. It remains to be seen whether Microsoft’s appeal will be successful, but the decision underlines the growing concerns among antitrust regulators about the concentration of power in the tech sector. As per information from the source, the CMA has had some success in reversing acquisitions by big-name tech firms, with Meta’s takeover of Giphy being one such example. The CMA’s decision demonstrates the importance of protecting competition in the fast-growing cloud gaming market, which has the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive gaming consoles and PCs, and giving them more choice about how and where to play.
