The UK’s Competition Markets Authority (CMA) has blocked Microsoft from purchasing the gaming studio Activision Blizzard over concerns the deal could “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”.
Microsoft first announced its intention to buy Activision in January 2022 for US$68.7 billion, leading to the CMA, the European Commission, and the Federal Trade Commission (FTC) in the US to all launch antitrust probes citing concerns about limiting competition in this gaming market.
The CMA started inviting views on the deal in July 2022 before launching an in-depth investigation in September. Two months ago, the regulatory body provisionally found that the merger could stifle competition.
In a statement outlining its reasons for preventing the deal, the CMA said although Microsoft submitted a proposal to address some of its concerns, that proposal ultimately contained a number of significant shortcomings. These included a failure to sufficiently open up to providers who might wish to offer versions of games on PC operating systems other than Windows and not taking into consideration different cloud gaming service business models.
Pushing back against the ruling, Microsoft said it remains fully committed to the acquisition with Activision Blizzard. “[Microsoft] will appeal today's determination by the CMA,” said Brad Smith, vice chair and president of Microsoft, in a Twitter post alongside a longer statement which said the decision “reflects a flawed understanding of the market.”
Microsoft will now be forced to try to negotiate an extension to its merger agreement, having originally hoped to close the deal by July. If its appeal against the CMA fails or the deal is blocked by the other regulators currently scrutinising the deal, Microsoft will be faced with a termination bill of up to US$3 billion, due a clause in the agreement that requires the payment be made if the termination is caused by an "injunction arising from Antitrust Laws”.