The Competition and Markets Authority, a U.K. regulatory agency that serves the same function as the Federal Trade Commission in the U.S., has blocked Microsoft’s pending $68.7 billion acquisition of Activision Blizzard over cloud gaming concerns.
This news is somewhat shocking, as quite a few experts predicted the CMA would allow the deal to go through, and while this block presents a large barrier to Microsoft’s progress forward toward this acquisition, it’s not a be-all, end-all for the purchase. Microsoft says it remains dedicated to this acquisition and will appeal the CMA’s ruling.
As for why the CMA is moving to prevent the acquisition, it cites 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,” in its official announcement.
“The final decision to prevent the deal comes after Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector, outlined in the Competition and Markets Authority (CMA) provisional findings published in February,” it continues. “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 says elsewhere in the announcement that this 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” and that “evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.”
Prior to this block, Microsoft did submit a proposal to address some of the CMA’s concerns but ultimately, it failed to sway the agency. The CMA laid out “a number of significant shortcomings connected with the growing and fast-moving nature of cloud gaming services” from Microsoft’s proposal:
- 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 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.
Microsoft released a statement about today’s announcement, citing that it is disappointed the decision seemingly reflects a flawed understanding of the video game (and cloud gaming) market. It will appeal the decision. Here is Microsoft’s statement, in full, from vice chair and president Brad Smith:
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 United Kingdom. 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.
Beyond this CMA decision and Microsoft’s forthcoming appeal of it, Microsoft still has to content with the Federal Trade Commission, who, like the CMA, can move to block (or greenlight) the deal here in the States.
What do you think this means for Microsoft’s pending acquisition of Activision Blizzard? Let us know in the comments below!
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