UK’s Competition and Markets Authority Blocks Microsoft’s Acquisition of Activision Blizzard

Credit: CMA/Activision Blizzard

UK government regulator the Competition and Markets Authority (CMA) announced Wednesday that it has blocked Microsoft’s proposed $69B USD acquisition of Call of Duty and World of Warcraft maker Activision Blizzard.

Surprisingly, the deal wasn’t blocked over concerns about Call of Duty being exclusive to Xbox—the agency said in its ruling that it was opposing the acquisition over concerns about Microsoft’s cloud gaming businesses and Activision Blizzard titles becoming exclusive offerings on them.

“The final decision to prevent the deal comes after Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector, outlined in the Competition and Markets Authority’s (CMA) provisional findings published in February.”

Activision Blizzard  CEO Bobby Kotick announced shortly thereafter that both companies would appeal the decision and that the fight over this deal is far from over.

The CMA said that Microsoft’s proposal for remedies for cloud gaming issues had a number of shortcomings:

• It did not sufficiently cover different cloud gaming service business models, including multigame subscription services.
• It was not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows.
• It would standardize the terms and conditions on which games are available, as opposed to them being determined by the dynamism and creativity of competition in the market, as would be expected in the absence of the merger.

Further, the CMA said that Microsoft would likely raise the price of Game Pass subscriptions post-merger:

“The CMA carefully considered whether the benefit of having Activision’s content available on Game Pass outweighed the harm that the merger would cause to competition in cloud gaming in the UK. The CMA found that this new payment option, while beneficial to some customers, would not outweigh the overall harm to competition (and, ultimately, UK gamers) arising from this merger, particularly given the incentive for Microsoft to increase the cost of a Game Pass subscription post-merger to reflect the addition of Activision’s valuable games.”

You can read the entire ruling here.