Microsoft Activision

CMA blocks Microsoft’s acquisition of Activision Blizzard in UK

The UK is clearly closed for business

Microsoft Activision Blizzard Acquisition - Story 2 of 10

The Competition and Markets Authority (CMA) in the UK has blocked Microsoft’s $68.7bn (£55bn) deal to acquire video game maker Activision Blizzard.

But the regulator said it was concerned the deal would offer reduced innovation and less choice for gamers in the fast-growing cloud gaming business.

The decision was taken after Microsoft “failed to address” the concerns expressed by the CMA in February, following an investigation over the deal that would have seen Microsoft acquire hit titles such as Call of Duty and Candy Crush in the “biggest takeover in tech history”.

The CMA reached its conclusion after analysing over three million Microsoft and Activision documents and more than 2,100 emails from the public. The regulator’s main concern was the risk that Microsoft would make Activision’s games exclusive to its existing cloud gaming platform, Xbox Game Pass, cutting off distribution to other key players in the space.

“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,” the CMA said.

The CMA has estimated that Microsoft controls around 60 to 70 per cent of the global cloud gaming services, which are forecast to be worth up to £11bn globally and £1bn in the UK by 2026.

For this reason, the acquisition of Activision’s extremely popular games such as Call of Duty, Overwatch, and World of Warcraft would give Microsoft a significant advantage in the cloud gaming market.

Microsoft has argued that it wouldn’t be financially beneficial to withhold Call of Duty  from PlayStation, Nintendo and other rivals given the licensing income it generates, going as far as to offer 10-year license agreements to these other platforms.

Microsoft had agreed to buy Activision Blizzard, for around $68.7bn, including net cash, in the biggest deal ever for the company.

Under the terms of the deal, Microsoft would pay shareholders of the company behind gaming franchises such as Call of Duty, World of Warcraft and Candy Crush $95 per share, a 45 per cent premium on its closing price last week.

Besides amassing content that would boost its position against rival Sony, the world’s biggest software company said the Activision deal would serve as a springboard for its move into the metaverse, the name given to the immersive virtual worlds that all the big tech companies are racing to build.

Microsoft and Activision said they would appeal.

“The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses,” a spokesperson for Activision said.

“We will work aggressively with Microsoft to reverse this on appeal.

“The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”

Brad Smith, vice chairman and president of Microsoft, said the company was still committed to the acquisition.

“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,” he said.

“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.”

To go through, the deal has to be approved by regulatory bodies in the UK, United States and European Union.

In the US, the Federal Trade Commission (FTC) has already sued to block the deal, while the EU is also currently investigating the merger and its potential anti-competitive repercussions.  

CMA Statement on Microsoft’s Acquisition of Activision

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