The UK Competition and Markets Authority (CMA) has blocked Microsoft’s proposed acquisition of Activision Blizzard for $69 million. The decision was based on the potential impact of the acquisition, following a months-long investigation. The CMA’s main concern was the potential harm to gamers through stifling competition in the growing market for cloud gaming services, rather than market dominance through franchise ownership.
Potential Dominance in Cloud Gaming Sector
If Microsoft were to own Activision Blizzard’s library of games, this could contribute to its potential dominance in the cloud gaming sector. However, the CMA stated that it was not specifically concerned about this eventuality. Microsoft has made it clear that exclusivity of games was not a priority for the company, and it had penned multiple 10-year deals for Call of Duty to ensure regulatory bodies understood that it would have few incentives to make popular franchises exclusive to Xbox consoles.
Concerns about Burgeoning Cloud Gaming Market
However, Microsoft failed to address concerns about the burgeoning cloud gaming market. The CMA found that cloud gaming could be transformative for the gaming industry in the next few years, helping to reach new customers and improve choice for existing customers. Microsoft’s innovation in this space was called out as a major factor in the decision to block the deal, as its strong position in the current market, combined with the acquisition of Activision Blizzard assets, could lead to a disparity in the future.
Microsoft to Appeal Decision
Microsoft has refuted the CMA’s assessment and promised to appeal the decision. The company remains fully committed to the acquisition and stated that the CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom. Activision Blizzard has also expressed its disappointment and frustration with the CMA’s decision. We expect to hear more about appeal proceedings in the coming months.