Microsoft’s $68.7 billion purchase of Activision has been blocked by the United Kingdom’s Competition and Markets Authority over concerns that it would “damage competition in the cloud gaming market.”
In a statement released on April 26, the CMA wrote that Microsoft’s proposal failed to effectively address concerns it had surrounding the cloud gaming sector and that solutions put forward by the tech giant had failed to address “significant shortcomings” the government body had raised.
The CMA said purchasing Activision would further expand Microsoft’s advantage in cloud gaming. It reportedly already accounts for 60 to 70 percent of cloud gaming services around the world. Microsoft already has Xbox and a number of exclusive AAA titles, a significant cloud infrastructure, and owns Windows which most PC gamers use.
With control over massive franchises like Call of Duty, World of Warcraft, and Overwatch, the CMA believes Microsoft would find making these titles exclusive to Microsoft-owned platforms a huge benefit commercially and could stifle cloud gaming innovation in the future.
“Cloud gaming needs a free, competitive market to drive innovation and choice,” the statement reads. “That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”
Microsoft did propose a solution in an attempt to alleviate some of these concerns, in the form of 10-year deals with competitors to keep Activision’s biggest games on their consoles. While Nintendo accepted the offer, Sony has yet to sign on the dotted line and has been a staunch critic of the deal, saying licensing costs could force it to raise prices on Activision Blizzard games, which would hurt consumers.
The CMA said this solution would require oversight from the regulatory body while blocking the deal allows companies to continue to mold the future of cloud gaming without regulatory interference.
Following the announcement, Microsoft president Brad Smith tweeted that the company “remain committed” to the acquisition, and intends to appeal the CMA’s decision.
“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,” he writes. “We’re especially disappointed that after lengthy deliberations, the decision appears to reflect a flawed understanding of this market and the way relevant cloud technology actually works.”
The CMA’s decision is the latest in a number of setbacks for the $68.7 billion deal. The U.S. Federal Trade Commission filed a lawsuit to block the merger back in December 2022, while the European Commission is still deliberating on the deal.
