In one of the biggest setbacks to Xbox’s $69 billion bid to acquire Activision Blizzard to date, the UK’s Competition and Markets Authority (CMA) has decided to block Microsoft’s deal.
The body’s concerns were that the takeover would have an unfair impact on Xbox’s biggest rival in the industry – PlayStation.
Earlier reports had suggested that things were looking positive towards the CMA allowing the deal, but that’s evidently not been the case. In the accompanying press release, the CMA said, “The final decision to prevent the deal comes after Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector, outlined in the Competition and Markets Authority’s (CMA) provisional findings published in February.
Microsoft entered into a $68.7 billion deal to buy Activision, one of the most popular video games publishers in the world, in January 2022. The CMA launched an in-depth review of the deal in September 2022, and in February 2023 provisionally found that the merger could make Microsoft even stronger in cloud gaming, stifling competition in this growing market.”
We’ve prevented @Microsoft from purchasing @Activision over concerns the deal would damage competition in the #CloudGaming market, leading to less innovation and choice for UK #gamers. ??https://t.co/SdXt1rYAkZ pic.twitter.com/prWcDI7Evt
— Competition & Markets Authority (@CMAgovUK) April 26, 2023
The CMA also outlined some of what it considered the shortcomings of Microsoft’s proposal, stating:
- It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
- It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
- It would standardise the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.
“We remain fully committed to this acquisition and will appeal,” Microsoft president Brad Smith has reportedly said in response to the decision. “The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom.
“We have already signed contracts to make Activision Blizzard’s popular games available on 150m more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”
Update: Activision Blizzard has also now issued a statement on the decision, promising to appeal the decision alongside Microsoft, with current CEO Bobby Kotick saying, “Today, the Competition and Markets Authority (CMA), a regulatory agency in the UK, decided not to approve our merger with Microsoft. This isn’t the news we wanted – but it is far from the final word on this deal.
“Alongside Microsoft, we can and will contest this decision, and 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.”
