Microsoft-Activision takeover blocked by UK

Following months of scrutiny, the UK’s Competition and Markets Authority (CMA) has blocked Microsoft’s acquisition of Activision-Blizzard.

The deal initially faced resistance from authorities amid concerns it would impact competition between PlayStation, Nintendo and Microsoft. However today’s decision appears primarily driven by the potential impact on cloud gaming.

Microsoft’s already-strong position in cloud gaming raised concerns the deal may ‘stifle competition in the growing market.’ The CMA cited that they believed the company would ‘find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.’

Martin Coleman, the Chair of the independent panel who conducted this investigation, stated:

‘Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors.’

Both Microsoft and Activision-Blizzard have released statements on the shock decision. Brad Smith, the President of Microsoft, stated:

‘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 150m more devices, and we remain committed to reinforcing these agreements through regulatory remedies.’

During deliberations over the deal, Microsoft committed to a series of 10-year deals with various partners such as Nintendo. However, the CMA found these to be inconsequential, citing the continually changing marketplace and the risk of disagreement between agreeing partners.

Following the decision, Microsoft has stated its intention to appeal the decision. This sharply decreases the chances of the deal passing by the end of this year.

A straightforward appeal is generally aimed to be resolved within nine months, before it is then returned to the CMA. With the body taking quite a hardline stance, a U-turn seems unlikely.

Furthermore, the deal is still subject to scrutiny from the US Federal Trade Commission (FTC), and the European Union’s European Commission (EC). The EC’s decision will come first and is due at the end of May with the FTC’s decision following at the beginning of August.

Earlier today, the New York Post reported Microsoft wished to look into a swift resolution with the FTC, should the CMA have approved the deal. As the FTC is in the process of taking legal action to prevent the merger, the CMA’s decision may weight this in their favour.