Microsoft’s acquisition of Activision Blizzard has been blocked by UK regulators

Microsoft’s $68.7 billion deal to acquire Activision Blizzard has been blocked by the UK’s Competition and Markets Authority (CMA). After months of analyzing 3 million Microsoft and Activision documents and more than 2,100 emails from the public, the The Capital Markets Authority concluded that the deal could “change the future of the rapidly growing cloud gaming market, leading to less innovation and fewer choices for UK gamers over the coming years”.

Microsoft says it will appeal the decision, but it’s a blow to Microsoft’s hopes of acquiring Activision Blizzard and is likely to prevent the company from closing its giant deal if the appeal is unsuccessful.

“Microsoft has a strong position in cloud gaming services, and the evidence available to the CMA has shown that Microsoft will find it commercially advantageous to make Activision games exclusive to its cloud gaming service,” says the CMA.

CMA estimates that Microsoft controls about 60 to 70 percent of global cloud gaming services and this adds control call of Dutyy OverwatchAnd World of Warcraft That would give Microsoft a huge advantage in the cloud gaming market.

Microsoft attempted to address concerns about cloud gaming in the lead-up to this decision. The software giant has signed cloud gaming deals with Boosteroid, Ubitus and Nvidia to allow Xbox PC games to be played on competing cloud gaming services – after striking a similar deal with Nintendo in December. These 10-year deals also include access to Call of duty and other Activision Blizzard games, if the deal is approved by regulators.

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The CMA says it has examined these deals, but they contain “a number of significant shortcomings” for cloud gaming services. The CMA says the deals are “very limited in scope” with the models meaning players have to earn the right to play games “by purchasing them from certain stores or subscribing to certain services”. The deals did not include agreements for Microsoft to provide access to these games on competing multi-game subscription services or the ability for competitors to “offer versions of games on non-Windows PC operating systems”.

The CMA also noted that the deals would “standardize the terms and conditions on which games are available,” rather than open competition in the cloud gaming market. “We have concluded that without the merger, Activision games will become available on cloud gaming services in the UK in the near future.”

CMA initially sided with Microsoft Call of duty on PlayStation concerns last month, stating that it would be costly for Microsoft to block the popular franchise from PlayStation. This left some cloud gaming concerns on the table, but the regulator says it has considered whether the benefit of having Activision content on Game Pass outweighs concerns about cloud gaming in the UK.

says Martin Coleman, chair of the independent panel of experts conducting the investigation.

“We remain fully committed to this acquisition and will resume,” Microsoft President Brad Smith said in a statement. the edge. “The CMA’s decision rejects a pragmatic path to addressing competition concerns and discourages technology innovation and investment in the UK. We have already signed contracts to make Activision Blizzard’s popular games available on an additional 150 million devices, and remain committed to strengthening these agreements through regulatory remedies. We are particularly disappointed that it After lengthy deliberation, this decision appears to reflect a misunderstanding of this market and the way related cloud technology actually works.”

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Activision Blizzard CEO Bobby Kotick says the company has already begun working on a resume in a letter staff on Wednesday. “Together with Microsoft, we can and will contest this decision, and we have already begun work on an appeal to the UK Competition Court of Appeal,” says Kotick. “We are confident in our case because the facts are on our side: this deal is good for the competition.”

An appeal from Microsoft will delay the company’s plans to try to get through this deal by the end of July. Microsoft had originally planned to close the deal by July 18th, and will now have to negotiate an extension to the merger agreement. If Microsoft’s CMA appeal fails or fails to obtain approval from other regulators, it will owe Activision $3 billion in breakup fees.

Regulators in Saudi Arabia, Brazil, Chile, Serbia, Japan and South Africa approved the deal. The European Union is due to make a decision by May 22, with Reuters It reported last month that the deal was likely to be approved by EU regulators following Nvidia and Nintendo’s licensing agreements.

Microsoft also faces regulatory scrutiny from the Federal Trade Commission (FTC) in the United States. The Federal Trade Commission sued to block Activision Blizzard’s purchase from Microsoft last year, and that investigation is still ongoing. guide scheduled to be heard On August 2nd, there are signs that the case may reveal rare details about exclusive deals in the gaming industry if the documents are made public.

Update, April 26 8:13 a.m. ET: The article has been updated with more detail from the CMA on cloud concerns.

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