In a landmark decision, the UK’s Competition and Markets Authority (CMA) has blocked Microsoft’s proposed $69 billion acquisition of Activision Blizzard, citing concerns over the future of the fast-growing cloud gaming market.
The regulator’s final report, published on Wednesday, indicated that the deal could lead to reduced innovation and less choice for UK gamers in the coming years. This marks a significant hurdle for Microsoft, as the UK regulator is seen as one of the most influential entities deciding the deal’s fate, alongside the EU and the US.
While the CMA’s decision creates obstacles for Microsoft, the company is also facing opposition in the US. The Federal Trade Commission is suing Microsoft in an attempt to block the deal over competition concerns. Meanwhile, the EU continues to investigate the acquisition. Microsoft has confirmed its intention to appeal the CMA’s decision, demonstrating the company’s commitment to completing the acquisition.
The CMA’s report indicated that Microsoft’s strong position in cloud gaming services and the evidence suggesting the company would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service prompted the decision to block the deal. Microsoft currently accounts for an estimated 60-70% of global cloud gaming services, and its control over key gaming content, such as Call of Duty, Overwatch, and World of Warcraft, could further consolidate its market advantage.
Microsoft president Brad Smith expressed disappointment in the CMA’s decision, stating that the company remains committed to the acquisition and will appeal. Smith criticized the regulator’s decision, claiming that it discourages technology innovation and investment in the UK. Activision also announced its intention to work with Microsoft on the appeal and accused the CMA of providing a disservice to UK citizens.
The CMA’s decision comes as a surprise, as the regulator initially appeared to be moving towards approving the deal. In February, the CMA provisionally found that the merger could reduce competition but partially reversed its decision a month later. However, the final decision indicates that Microsoft’s proposed solution failed to effectively address concerns in the cloud gaming sector. Microsoft had attempted to address regulatory concerns by striking game distribution deals with several cloud gaming services, including GeForce Now, Boosteroid, and Ubitus.