We reported earlier this week that Microsoft’s acquisition of Activision Blizzard is expected to be approved in the UK. However, it seems this took a turn for the worst, with the CMA surprisingly blocking the acquisition.
Unveiled in the early days of January 2022, the colossal acquisition of Activision/Blizzard by tech giant Microsoft, valued at a staggering $68.7 billion, has encountered a significant obstacle in the United Kingdom. On Wednesday, the UK’s foremost regulatory body for overseeing fair competition, the Competition and Markets Authority (CMA), publicized its determination to halt the merger between Microsoft and Activision. The CMA expressed its concerns that this monumental transaction would harm the competitive nature of the cloud gaming sector. This particular aspect of the gaming industry, the CMA’s investigation revealed, is predominantly under the influence and control of Microsoft.
Why CMA blocked the Microsoft acquisition?
The decision made by the CMA is not related to the availability of the popular game franchise Call of Duty on the PlayStation 5 platform, which had been a cause for concern among avid fans when Microsoft initially announced its acquisition plans last year. Instead, the regulatory authority has underscored the potential hazards that the merger could pose to the competitive landscape of the cloud gaming industry as the primary motivation behind its decision.
The CMA has presented a compelling case, asserting that Microsoft holds a dominant position in the cloud gaming sphere based on the evidence gathered by the regulatory authority. In addition, the CMA’s findings indicate that, from a commercial standpoint, it would be advantageous for Microsoft to render Activision’s games exclusive to its proprietary cloud gaming service.
The agency estimates that Microsoft is responsible for an impressive 60-70% of the global cloud gaming services market. The Xbox, Windows, and Microsoft’s robust Azure and Xbox Cloud Gaming cloud computing infrastructure further bolsters the company’s formidable presence in the cloud gaming industry.
According to the CMA, if the deal were not to proceed, Activision would likely begin to offer some of its games via cloud platforms in the near future. The regulator also contends that UK gamers would benefit from having access to cloud gaming services, as it would enable them to circumvent the need to purchase costly gaming consoles.
The Microsoft appeal
Thus far, the CMA is the sole regulatory authority to obstruct the proposed acquisition, and Microsoft will probably seek to appeal this recent ruling. The CMA has acknowledged that Microsoft actively collaborated with the agency, offering potential remedies to persuade the regulator to approve purchasing Activision.
In response to the CMA’s ruling, Microsoft has declared its intention to appeal the decision. Expressing disappointment, Microsoft President Brad Smith stated, “We are particularly disheartened that, despite extensive deliberations, this decision seems to be based on a flawed comprehension of the market dynamics and the actual functioning of the pertinent cloud technology.”
It will be interesting to see if Microsoft’s appeal will persuade the CMA about this acquisition and evidently, if the European Union will be the first one to approve this deal or not.