It’s game over for Microsoft in the UK as the CMA has prevented the company from buying Activision.
In what is a huge setback for the biggest deal in gaming history, the UK’s competition regulator has blocked Microsoft from acquiring Activision Blizzard for $69bn on grounds that it would stifle innovation and choice in cloud gaming.
This comes less than three months after the Competition and Markets Authority (CMA) provisionally found that the deal could harm 45m gamers in the UK following an in-depth investigation that was launched last September.
The CMA said that Microsoft “failed to effectively address the concerns in the cloud gaming sector” raised in the provisional findings, including what it calls ‘behavioural’ remedies such as requirements on what games must be offered by Microsoft to what platforms and on what conditions over a 10-year period.
Microsoft’s proposal contained “significant shortcomings”, the watchdog claimed, such as not sufficiently covering different cloud gaming service business models and not being sufficiently open to providers who might wish to offer versions of games on PCs without Windows.
“It would standardise 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,” a statement by the CMA reads.
“Accepting Microsoft’s remedy would inevitably require some degree of regulatory oversight by the CMA. By contrast, preventing the merger would effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention.”
Deal now unlikely to go through
While the CMA only investigated the deal from a UK perspective, its latest decision could prevent the deal from closing at all because it would be impractical for a merged Microsoft-Activision company to operate outside the UK market, which has a fast-growing cloud gaming sector.
According to figures cited by the CMA, UK monthly active users in cloud gaming more than tripled between 2021 and 2022. Globally, the sector is forecast to be worth up to £11 billion – and £1 billion in the UK alone – by 2026.
The fact that Microsoft already accounts for an estimated 60-70pc of global cloud gaming services thanks to Xbox doesn’t help its case.
“The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft,” the CMA said.
“The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.”
Outside the UK, Microsoft is trying to douse regulatory fires in the EU and the US. Last month, the EU competition regulator pushed back its deadline to rule on the deal from 25 April to 22 May after Microsoft submitted remedies to salvage the deal.
The Federal Trade Commission in the US sued to block the deal amid fears it would allow Microsoft to “suppress competitors” and harm competition in “multiple dynamic and fast-growing gaming markets” across the world.
Earlier today, the UK unveiled a new bill that aims to reign in Big Tech dominance and give regulators such as the CMA new powers to tackle unfair business practices and handle the “excessive dominance” that a small number of tech companies currently hold.
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