The UK Competition and Markets Authority (CMA) has prevented Microsoft’s proposed purchase of Activision Blizzard after an in-depth review of the deal. The CMA is concerned that the deal will harm the local cloud gaming market.

Here are the main points:

  • Microsoft already accounts for an estimated 60-70% of global cloud gaming services.
  • Microsoft has other important strengths in cloud gaming besides Xboxincluding leading services like Windows and Azure.
  • Activision Blizzard is planning to provide its games via cloud platforms.
  • Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.
  • All of this means that the deal would give Microsoft an advantage in the cloud market if it received control over key market blockbusters like Call of Duty, Overwatch, and World of Warcraft.

The CMA also found that the remedies Microsoft submitted to address concerns were not suitable.

In short:

  • Microsoft said it would guarantee the presence of some set of products on peculiar platforms over a ten-year period.
  • The CMA found this remedy as ‘behavioral’ which means that a company is going to regulate the conduct of the businesses that will be part of the merger in a way which may be contrary to their interests.

In short, from a CMA perspective, requiring being on any platform for a long period of time is a bad decision, especially in a rapidly changing market like cloud gaming.

Therefore, from a CMA point of view, it is better to pull up the deal.

“Gaming is the UK’s largest entertainment sector. Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games. This means that it is vital that we protect competition in this emerging and exciting market”, said Martin Coleman, chair of the independent panel of experts conducting the investigation.

Interestingly, the CMA also points out that it has “no concerns about the impact of the deal on the console gaming market”.

Microsoft’s reaction to the prevention was immediate. Company president Brad Smith made a clear statement that the fight is not over: “We remain fully committed to this acquisition and will appeal”.

Judging by the tone of words that Activision Blizzard made afterwards, someone in the game company is really angry. The company said, “We will reassess our growth plans for the U.K. Global innovators large and small will take note that — despite all its rhetoric — the U.K. is clearly closed for business.”

Just a few days ago, Microsoft was optimistic about CMA`s approval. The company hoped that UK`s regular permission would help it to deal with US`s regulator, the Federal Trade Commission (FTC), which blocked the deal in late 2022. However, it now seems that it will not happen.

The next stop is Europe, where the local regulator is still investigating.

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