Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc. took a severe hit after Britain’s antitrust authority blocked the transaction, claiming it would hurt competition in cloud gaming. This decision may serve as a precedent for other major regulators across the world.
According to a statement released on Wednesday, the Competition and Markets Authority claimed that its worries couldn’t be addressed by measures like the sale of the popular game Call of Duty or other approaches involving commitments to allow rivals to distribute the game on their platforms. Microsoft declared that it would contest the ruling.
Microsoft has been under increasing pressure as it campaigns both domestically and abroad to persuade watchdogs to approve the merger, one of the 30 largest acquisitions in history. Importantly, the CMA’s findings come before judgments from the European Union and the US Federal Trade Commission, which is awaiting a hearing in the summer after filing a formal lawsuit to block the sale.
At 7:20 a.m. in New York, Activision shares fell more than 10% in pre-market trading. Microsoft increased 7.4% after releasing its own better-than-expected quarterly results on Tuesday.
“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,” Martin Coleman, chair of the independent panel of experts conducting this investigation, said.
According to the CMA, the combination may lead to greater costs, less options, and less innovation for gamers in the UK. After considering fresh data, it narrowed its initial focus earlier this month to concentrate on cloud gaming rather than consoles.
“We remain fully committed to this acquisition and will appeal,” Brad Smith, vice chair and president of Microsoft, said. “The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the UK.”
Microsoft had been waging a visually appealing road show of press conferences in Brussels and full-page ads in British newspapers to try to sway public opinion on the acquisition while battling the regulatory struggle in the UK and Europe.
The CMA claimed that by giving Microsoft control over the popular video games Call of Duty, Overwatch, and World of Warcraft, the agreement would reinforce Microsoft’s competitive advantage. The watchdog discovered that Activision would be able to start offering games on cloud platforms in the future even without the merger.
Any viable cure would require some level of regulatory control, according to Britain’s competition watchdog, which is normally opposed to behavioral remedies.
“The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses,” an Activision spokesperson said. “We will work aggressively with Microsoft to reverse this on appeal.”
Ever since the nation exited the EU, the agency has made an effort to position itself as a premier worldwide regulator. It has recently demonstrated its might by taking on Big Tech businesses, informing Meta Platforms Inc. that it must cancel its acquisition of Giphy amid concerns that it might gain control of the GIF industry.
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