Microsoft proudly announced last year that they were entering into a deal to purchase Activision Blizzard. But today, the UK Competition and Markets Authority has blocked the deal.
That means, as of right now, the acquisition is not happening. The Competition and Markets Authority (CMA), who regulates business deals to ensure a fair marketplace, has ruled against the £55 billion buyout. The CMA has said Microsoft’s proposal “failed to effectively address the concerns in the cloud gaming sector”. In other words, it believes that such an acquisition would damage competition and innovation in cloud gaming – an area that Microsoft is currently leading in.
As per the official statement published on the gov.uk website, “Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.” It goes on to state that an estimated two-thirds of global cloud gaming services are already controlled by Microsoft, and their purchase of Activision would reinforce the company’s advantage in the cloud gaming market.
This was a concern addressed by the CMA back in February, with Microsoft providing a remedial proposal. But the CMA has deemed the proposal insufficient for several reasons:
- Microsoft failed to cover different cloud gaming business models;
- The proposal didn’t account for providers who might want to offer PC games on other operating systems outside of Windows; and
- It would “standardise the terms and conditions” over what games are available rather than allowing for creativity and dynamism in the market.
Microsoft plans to appeal the CMA’s decision to block the Activision acquisition
So what’s next? Microsoft president Brad Smith has published a statement on Twitter, stating the company’s commitment to the acquisition. Microsoft will be appealing against the CMA’s decision, and so the drawn-out battle will go on.
In his statement, Smith says:
“We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the UK. We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after length deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”
Regardless of the CMA’s decision in the UK, Microsoft is still to get approval from regulators in the US and the EU: the Federal Trade Commission (FTC) and European Commission respectively. Neither have provided a final decision on the deal.
This is a big blow for Microsoft, but if Brad Smith’s statement is anything to go by, we can expect the company to remain publicly optimistic about the deal eventually going forward. It’s possible Microsoft’s appeal will be approved, but it’ll be a long process, and undoubtedly the CMA’s current block of the deal will also be taken into consideration by the FTC and European Commission.