Yahoo Finance UK watchdog blocks Microsoft’s $69bn acquisition of Activision Blizzard
The UK’s competition regulator has moved to block Microsoft’s (MSFT) acquisition of the Call of Duty maker Activision Blizzard, in a possible fatal blow to the $69bn (£55bn)deal.
The Competition and Markets Authority said it believed the company would be commercially motivated to make Activision’s games exclusive to its own cloud gaming service.
Cloud gaming is a technology that enables gamers to access games via companies’ remote servers, allowing users to stream a game like one would on Netflix.
Martin Coleman, chair of the independent panel of experts conducting the CMA investigation, said: “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.
“Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.
“Cloud gaming needs a free, competitive market to drive innovation and choice.
“That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”
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In a statement, Microsoft’s president Brad Smith said the company was “disappointed” by the CMA’s decision and claimed it would appeal.
“We remain fully committed to this acquisition and will appeal. 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 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.”
Ed Vaizey, the former Tech and Culture minister, has criticised the move by the regulator to block Microsoft's swoop on Activision.
Bad decision https://t.co/Kzx2T1YteM
— Ed Vaizey (@edvaizey) April 26, 2023
A spokeswoman for Activision Blizzard said: “The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses.
“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.”
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Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "The CMA has concerns that the deal could undermine fair competition in cloud gaming if the Xbox maker decides to make Activision’s games exclusive to its cloud gaming platform. Cutting alternative distribution off at the knees is seen as a step too far for the UK authorities.
"Scepticism among shareholders about the proposed takeover was already rife, the CMA is not the only regulatory body to be sniffing around the deal. Microsoft has plenty of financial resource to appeal the decision, with over $50bn of net cash languishing on the balance sheet."
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