Microsoft’s Activision Blizzard Deal Blocked by UK Regulators

The U.K. competition regulator, the Competition and Markets Authority (CMA), has voted to block Microsoft’s proposed acquisition of Activision Blizzard.

In the drawn-out saga of Microsoft’s $68.7 billion USD (around $93.6 billion CAD) deal to purchase Call of Duty and Diablo developer and publisher, the CMA has issued its final report. It’s been reported that the U.K. regulator is blocking the deal over concerns that it would “alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”

As reported by VideoGamesChronicle, the regulator states, “The CMA has prevented Microsoft’s proposed purchase of Activision over concerns the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”

According to the CMA, the deal was blocked for failing to address the following regarding cloud gaming services:

  • 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 standardize 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.

Microsoft has become a leader within the cloud gaming space, with the support of Xbox Cloud Gaming. Many titles offered via Xbox Game Pass are available to play on many devices including smartphones, Samsung TVs, PC, and even Xbox consoles. “Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming),” the CMA states.

Microsoft president Brad Smith says that the company is “disappointed” by the CMA’s decision. It will effectively look into an appeal.

“We remain fully committed to our acquisition with Activision Blizzard and will appeal today’s determination by the CMA.”

“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 lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”

Activision Blizzard CEO Bobby Kotick has issued an internal email with a statement on the matter. Kotick states that alongside Microsoft, the two companies have already started to work on an appeal. “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.”

Microsoft submitted a proposal in an attempt to quell some concerns that the deal may infringe on antitrust. Within the console space, Microsoft believed that acquiring Activision Blizzard would not impact the market too heavily. In order to convince regulators, Microsoft offered 10-year deals with Nintendo, Valve, and other companies. This would effectively see Call of Duty remain on competitive platforms for the next decade if the deal went through.

However, it appears as though Microsoft’s shortcomings in the eyes of the CMA all land within the cloud gaming realm. Though, the company has offered similar 10-year deals to cloud gaming companies. Recently, Microsoft penned deals with Ubitus, Boosteroid, as well as NVIDIA and its GeForce Now service.

Next month, the European Commission will propose its own verdict regarding the deal. The date on which the EU will publish its own vote on the matter is slated for May 22. Earlier this year, it was expected that Microsoft may gain approval from the EU. In the U.S., the Federal Trade Commission (FTC) is looking to block the deal as well.  It’s been investigating the proposed acquisition in order to file an antitrust suit against Microsoft. A suit is said to begin on August 2.

As it was first announced, Microsoft and Activision Blizzard have until June 2023 to move forward with a deal. Otherwise, the two may have to go back to the drawing board and pen a new agreement.