MICROSOFT’S $68.7 BILLION DEAL TO ACQUIRE ACTIVISION BLIZZARD BLOCKED BY UK REGULATOR
The UK’s Competition and Markets Authority (CMA) has blocked Microsoft’s $68.7 billion deal to acquire Activision Blizzard. The CMA concluded that the deal could reduce innovation and limit choice for UK gamers in the fast-growing cloud gaming market. Microsoft plans to appeal, but the decision could prevent the company from closing the deal if unsuccessful.
SIGNIFICANT ADVANTAGE FOR MICROSOFT IN CLOUD GAMING MARKET
The CMA estimates that Microsoft currently controls between 60 and 70 percent of global cloud gaming services. The addition of control over Activision’s games, such as Call of Duty, Overwatch, and World of Warcraft would give the company a significant advantage in the cloud gaming market.
SHORTCOMINGS IN CLOUD GAMING SERVICE DEALS
Microsoft attempted to address concerns around cloud gaming in the lead-up to the decision by signing cloud gaming deals with rival services. However, the CMA examined these deals and found significant shortcomings, including a lack of coverage for different cloud gaming business models and insufficient openness to providers seeking to offer games on operating systems other than Windows. The deals would also standardize the terms and conditions for game availability, limiting dynamism and competition in the market.
MICROSOFT ENGAGED CONSTRUCTIVELY BUT PROPOSALS FOUND INEFFECTIVE
The CMA initially sided with Microsoft over concerns regarding Call of Duty, but found that the company’s proposals to address cloud gaming concerns were ineffective. The chair of the independent panel of investigation experts, Martin Coleman, stated, “their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.”
MICROSOFT PLANS TO APPEAL DECISION
Microsoft President, Brad Smith, expressed disappointment in the CMA’s decision and stated that Microsoft remains fully committed to the acquisition and will appeal the decision. Activision Blizzard CEO, Bobby Kotick, has also expressed confidence in the company’s case and stated that the company has already started work on an appeal.
REGULATORS IN OTHER COUNTRIES HAVE APPROVED THE DEAL, BUT FTC SCRUTINY REMAINS
Regulators in Saudi Arabia, Brazil, Chile, Serbia, Japan, and South Africa have approved the deal. The EU is set to make a decision by May 22nd, with Reuters reporting that the deal is likely to be approved. However, Microsoft also faces regulatory scrutiny from the Federal Trade Commission in the US, which sued to block the purchase last year. An evidentiary hearing is scheduled for August 2nd.
Reuters (source for EU approval likelihood)