UK Regulator Blocks Microsoft’s Acquisition of Activision Blizzard

Microsoft’s proposed acquisition of Activision Blizzard has just been hit by a huge roadblock. The UK’s Competition and Markets Authority (CMA) announced today that it was blocking the acquisition after Microsoft’s propositions failed to address the concerns of the UK regulator in the cloud gaming sector.

Last month, the CMA acknowledged that the acquisition would not harm competition in the console market, but the regulator continued to investigate the impact of the deal on the cloud gaming market. This was after Microsoft signed a 10-year Call of Duty deal with Nintendo and 10-year licensing deals with other cloud gaming platforms including Nvidia’s GeForce Now, Boosteroid, and Ubitus.

Microsoft argued that acquiring Activision Blizzard would allow the company to make these games available to 150 million more gamers. Still, the CMA believes that Microsoft would “find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service,” despite Microsoft’s various efforts to prove the contrary. The antitrust regulator also said that accepting Microsoft’s remedy (the 10-year cloud licensing deals with competitors) would require ongoing regulation of the cloud gaming market.

“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,” the CMA explained.

Even though Microsoft’s acquisition of Activision Blizzard has already been approved by regulators in Brazil, Japan, Saudi Arabia, South Africa, Chile, and Serbia, the company still needs the approval of the UK’s CMA and the EU to complete the deal. The EU Commission has until late May to make its decision public.

Microsoft President Brad Smith already said that the company will appeal the CMA’s decision. You can read the full statement from Brad Smith below:

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. -Brad Smith, Vice Chair and President.

In a message shared with Activision employees, Bobby Kotick, the CEO of Activision Blizzard said that the company will work on Microsoft to convince the CMA to change its stance.”This isn’t the news we wanted – but it is far from the final word on this deal. Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the UK Competition Appeals Tribunal. We’re confident in our case because the facts are on our side: this deal is good for competition,” the exec said.