LONDON, United Kingdom – The United Kingdom’s Competition and Markets Authority (CMA) has blocked Microsoft’s $69 billion purchase of Activision Blizzard, citing concerns that the acquisition would stifle competition in the rapidly growing cloud gaming market.
The decision, announced on Wednesday, April 26, 2023, sent Activision’s share price tumbling more than 11%, while Microsoft’s stock rose by 8%.
In a statement, the CMA expressed concerns that the merger could lead to “reduced innovation and less choice for UK gamers over the years to come.”
Microsoft, which already holds a 60%-70% global market share in cloud gaming, would be positioned to become “even stronger” through the acquisition of Activision Blizzard, one of the world’s largest video game developers.
The deal has faced mounting opposition from antitrust regulators worldwide, with the US Federal Trade Commission filing a lawsuit to block the takeover in December over similar competition concerns. The European Union is also evaluating the transaction.
Alex Haffner, a partner at London law firm Fladgate, described the UK decision as “seismic,” adding that it could potentially impact other regulatory decisions. “It’s hard to see how the deal would carry on without approval from all three regulators,” he said.
The CMA’s ruling suggested that Microsoft could make Activision’s games exclusive to its own platforms and potentially increase the cost of a Game Pass subscription. The authority emphasized the importance of a competitive cloud gaming market in driving innovation and choice.
Both Microsoft and Activision Blizzard plan to appeal the decision. Activision Blizzard CEO Bobby Kotick stated, “Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the UK Competition Appeals Tribunal.”
Microsoft President Brad Smith criticized the decision as reflecting “a flawed understanding of the market and the way the relevant cloud technology actually works.”
However, their chances of success at the tribunal may be slim, as Haffner explained that the bar for a successful appeal is set quite high.
The UK CMA has previously used its authority under the Enterprise Act 2002 to block deals such as 21st Century Fox’s takeover of Sky News and the sale of Asda supermarkets to rival Sainsbury’s.
