UK blocks acquisition of Activision Blizzard due to concerns about cloud gaming competition

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The British Competition and Markets Authority has blocked the acquisition of Activision Blizzard by Microsoft. The regulator does this because of concerns that the acquisition could distort competition in the cloud gaming market. The companies are appealing.

The CMA published its decision to block the takeover on Wednesday. The regulator concluded after months of investigation that the acquisition would “change the future of the fast-growing cloud gaming market, resulting in less innovation and less choice for UK gamers in years to come.” The decision comes as a surprise; CMA was expected to approve the acquisition on Wednesday, after it recently backed away from competition concerns in the console market.

The market watchdog says that Microsoft has not been able to sufficiently address the concerns of the regulator about competition in the cloud gaming sector. “Microsoft has a strong position in cloud gaming services and the evidence available to the CMA indicated that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.” Without the merger, Activision would offer its games via cloud platforms ‘in the foreseeable future’.

Microsoft concessions and CMA concerns

Microsoft has made several commitments to regulators in recent months. The company also made deals with Nvidia, Nintendo and cloud gaming platform Ubitus, among others, to make Activision games available on their platforms for a decade after the acquisition, but the CMA thought that was not enough. Microsoft has an estimated 60 to 70 percent market share, according to the CMA, and Microsoft’s advantage in the market would be strengthened if it gained control of game franchises like Call of Duty, Overwatch and World of Warcraft.

The measures proposed by Microsoft were, according to the CMA, “conduct measures” because they seek to regulate the behavior of the companies involved in the acquisition, requiring them to behave in “manners contrary to commercial incentives.” “So this takes the form of a kind of permanent regulation of the industry, replacing market forces in a growing and dynamic market with imposed legal obligations that are ultimately monitored and enforced by the CMA.”

The CMA also states that Microsoft’s commitments had several other shortcomings. For example, the proposal did not sufficiently address the different business models that cloud gaming services use. The proposal would also not be sufficiently open to providers who may wish to offer versions of games on PC operating systems other than Windows.

“The adoption of Microsoft’s remedy would inevitably require some degree of regulatory oversight by the CMA. In contrast, preventing the merger would effectively allow market forces to continue to shape and shape cloud gaming development without this regulatory intervention.”

Response Microsoft and Activision Blizzard

Microsoft and Activision Blizzard say they still want to try to complete the acquisition. Microsoft CEO Brad Smith said Wednesday that the company “is still fully committed” to consummating the acquisition and that the company will appeal. Also Activision CEO Bobby Kotick writes in an email that the company “can and will challenge” the decision along with Microsoft. The companies have already started work to appeal to the UK’s Competition Appeals tribunal. We are confident in our case because the facts are on our side: this deal is good for the competition.

Microsoft announced its intended acquisition of Activision Blizzard last year. The American tech giant wants to take over the publisher of Call of Duty and World of Warcraft, among others, for $ 68.7 billion. This would make it the largest acquisition ever in the gaming market. In recent months, the acquisition has already been scrutinized by regulators in various countries and regions. The US FTC has already sued Microsoft to block the acquisition. A decision from the EU is expected in May.

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