Microsoft’s Activision Blizzard acquisition has been blocked by UK regulators

Microsoft's Activision Blizzard acquisition has been blocked by UK regulators

Microsoft’s $68.7 billion deal to acquire Activision Blizzard has been blocked by the UK’s Competition and Markets Authority (CMA). After months of analyzing 3 million Microsoft and Activision documents and more than 2,100 emails from the public, the CMA concluded that the deal “could change the future of the fast-growing cloud gaming market, leading to less innovation and less choice for UK gamers. . in the years to come.”

Microsoft says it will appeal the decision, but it is a blow to Microsoft’s hopes of acquiring Activision Blizzard and would prevent the company from closing its massive deal if the appeal is unsuccessful.

“Microsoft has a strong position in cloud gaming services and the evidence available to the CMA shows that Microsoft would find it commercially advantageous to make Activision’s games exclusive to its own cloud gaming service,” says the CMA.

The CMA estimates that Microsoft controls about 60 to 70 percent of global cloud gaming services and adds control. Call of Dutty, OverwatchAnd World of Warcraft This will give Microsoft a significant advantage in the cloud gaming market.

Microsoft tried to address concerns surrounding cloud gaming in the lead up to this decision. After striking a similar deal with Nintendo in December – the software giant signed cloud gaming deals with Boosteroid, Ubitus and Nvidia to allow Xbox PC games to run on these rival cloud gaming services. This 10-year deal also includes access Call of Duty and other Activision Blizzard games, if the deal is approved by regulators.

The CMA says it has investigated the deals, but there are “a number of significant shortcomings” in cloud gaming services. The CMA says the deals are “very limited in scope” with models meaning gamers had to acquire the right to play games by “purchasing at certain stores or subscribing to certain services”. The deal did not include Microsoft’s ability to offer access to these games in competing multi-game subscription services or for competitors to “offer versions of the games on PC operating systems other than Windows”.

The CMA also noted that the deal would “standardize the terms and conditions on which games are available,” rather than open competition in the cloud gaming market. “We have concluded that, without the merger, Activision games will be available on cloud gaming services in the UK for the foreseeable future.”

CM initially sided with Microsoft Call of Duty Last month on PlayStation’s concerns, it was noted that it would be expensive for Microsoft to keep the popular franchise from PlayStation. That leaves some cloud gaming concerns on the table, but the regulator says it considered whether the benefits of having Activision’s content on Game Pass outweighed cloud gaming concerns in the UK.

“Microsoft engaged constructively with us to try to resolve these issues and we are grateful for that, but their proposals were not effective in addressing our concerns and would have replaced competition with ineffective regulation in a new and dynamic market,” said Martin Coleman, chairman. is An independent panel of experts conducted the investigation.

“We are fully committed to this acquisition and will appeal,” Microsoft President Brad Smith said in a statement. The Verge. “The CMA’s decision rejects a practical way to address competition concerns and discourages technology innovation and investment in the United Kingdom. We have already signed agreements to make Activision Blizzard’s popular games available on 150 million more devices, and we are committed to strengthening these agreements through regulatory measures. We are particularly disappointed that, after lengthy deliberation, this decision reflects a flawed understanding of this market and how related cloud technologies actually work.

Activision Blizzard CEO Bobby Kotick says the company has begun working on the appeal in an email to employees on Wednesday. “Together with Microsoft, we can and will challenge this decision, and we have already begun work on an appeal to the UK Competition Appeal Tribunal,” says Kotick. “We are confident in our case because the facts are on our side: this deal is good for competition.”

Microsoft’s appeal would have pushed back the company’s plan to try the deal by the end of July. Microsoft had originally planned to close the deal by July 18 and will now be forced to negotiate an extension to the merger agreement. Activision will owe $3 billion in break-up fees if Microsoft’s CMA appeal fails or if it fails to get approval from other regulators.

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 22, as well Reuters Last month reported that the deal was likely to be approved by EU regulators following Nvidia and Nintendo licensing agreements.

Microsoft also faces regulatory scrutiny from the Federal Trade Commission (FTC) in the US. The FTC filed suit last year to block Microsoft’s purchase of Activision Blizzard, and that investigation is still ongoing. An evidentiary hearing is scheduled for August 2nd, and there are indications that the case could uncover rare details on the games industry exclusivity deal if the documents are made public.

Update, April 26th at 8:13AM ET: Article updated with more details from CMA on cloud concerns.

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