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The U.K.\u2019s Competition and Markets Authority (CMA) has confirmed<\/a> that it intends to block Microsoft\u2019s megabucks Activision acquisition, concluding that such a merger would create \u201c\u2026the most powerful operator\u201d in the cloud gaming market.<\/p>\n The CMA noted<\/a> that with Microsoft\u2019s current share of 60-70% of the U.K. cloud gaming market, acquiring Activision\u2019s portfolio of games would \u201csubstantially weaken competition.\u201d It added that Microsoft would also have the incentive to withhold such games from competing gaming platforms.<\/p>\n By way of a brief recap, Microsoft first revealed plans to buy Activision in a whopping $68.7 billion deal<\/a> last January, a move that would essentially make Microsoft the third-largest gaming company in the world by revenue behind Tencent and Sony, while giving it direct control over mega-franchises such as Call of Duty and World of Warcraft.<\/p>\n Last July, the CMA confirmed it was launching an antitrust investigation<\/a> into the deal, then two months ago the regulator gave the strongest indication yet that it was gearing up to block the merger<\/a> when it provisionally concluded<\/a> it \u201ccould harm U.K. gamers\u201d by creating higher prices, fewer choices, and less innovation. Then last month, the CMA narrowed its position<\/a> to focus entirely on cloud gaming, rather than console gaming.<\/p>\n This is a position that the CMA has confirmed today, noting that while Microsoft could damage its closest competitor in the console market by withholding Call of Duty from Sony\u2019s PlayStation, it believed that Microsoft would be \u201cunlikely to do so.\u201d It said this was because PlayStation has a \u201clarge and profitable user base that regularly buys Call of Duty,\u201d and that losses from reduced sales to PlayStation users would outweigh any gains Microsoft were to attain from gamers switching to Xbox.<\/p>\n With cloud gaming, however, the CMA notes that Microsoft\u2019s market advantage owing to the proliferation of Windows and its \u201csignificant cloud infrastructure\u201d businesses would give it a strong foundation on which to gain an unfair advantage if it were to acquire Activision Blizzard\u2019s titles.<\/p>\n \u201cNo other cloud gaming operator has this combination of advantages,\u201d the CMA wrote. \u201cSome of these strengths are already reflected in Microsoft\u2019s current UK market share of cloud gaming of between 60-70%.\u201d<\/p>\n Microsoft vice chair and president Brad Smith issued<\/a> a statement immediately after the CMA published its final position today, saying that Microsoft intends to appeal the decision while pointing to recent moves it has made to alleviate competition concerns, which includes signing deals that would make Activision Blizzard games available on rival devices. Smith wrote:<\/p>\n We remain fully committed to this acquisition and will appeal. The <\/em>CMA\u2019\u2019s decision rejects a pragmatic path to address competition concerns <\/em>and discourages technology innovation and investment in the United Kingdom.<\/em><\/p>\n We have already signed contracts to make Activision Blizzard\u2019s popular games <\/em>available on 150 million more devices, and we remain committed <\/em>to reinforcing these agreements through regulatory remedies.<\/em><\/p>\n We\u2019re especially disappointed that after lengthy deliberations, <\/em>this decision appears to reflect a flawed understanding of this market <\/em>and the way the relevant cloud technology actually works.<\/em><\/p>\n -Brad Smith, Vice Chair and President<\/em><\/p>\n<\/blockquote>\n Indeed, Microsoft has made various commitments<\/a> toward keeping Activision games<\/a> on rival platforms including Sony, Nintendo, and Steam for a 10-year period. However, the CMA has taken the position that Microsoft\u2019s proposals can\u2019t replace the existing \u201ccompetitive dynamism,\u201d and would merely compensate for the loss of competition through \u201cobligations that would regulate its behaviour\u201d for 10 years only.<\/p>\n The CMA wrote:<\/p>\n We had to consider how best to remedy these concerns. Preventing the merger would preserve the competitive dynamism and level of innovation that exists in the growing cloud gaming market. In contrast, Microsoft proposed a remedy that sought to compensate for the loss of competition with a set of obligations that would regulate its behaviour and how it did business for a period of ten years. <\/em><\/p>\n Having carefully considered Microsoft\u2019s proposal, we found that it would not restore the competitive dynamism that would be lost as a result of the Merger. We decided, therefore, that a remedy that preserves competition, rather than one that imposes global regulatory oversight, is the only effective and proportionate way forward.<\/em><\/p>\n<\/blockquote>\n Activision Blizzard, for its part, does not mince its words in response to today\u2019s news. A spokesperson said that the CMA\u2019s report \u201ccontradicts the ambitions of the U.K. to become an attractive country to build technology businesses,\u201d adding that it will \u201cwork aggressively with Microsoft\u201d to appeal the decision.<\/p>\n \u201cThe report\u2019s conclusions are a disservice to U.K. citizens, who face increasingly dire economic prospects,\u201d the spokesperson said. \u201cWe will reassess our growth plans for the U.K. Global innovators large and small will take note that \u2014 despite all its rhetoric \u2014 the U.K. is clearly closed for business.\u201d<\/p>\n It\u2019s worth noting that the acquisition faces scrutiny in other regions around the world, including the European Union (EU) which has been mulling an in-depth probe<\/a> for some time already. The European Commission (EC) had previously set a provisional deadline of 25th April to announce a decision, but this was recently moved to May 22<\/a> following further remedies offered by Microsoft.<\/p>\n In the U.S., meanwhile, the\u00a0Federal Trade Commission (FTC) is suing to block the deal<\/a>, though Microsoft recently secured a dismissal<\/a> in a separate private antitrust lawsuit brought about by gamers.<\/p>\n<\/p><\/div>\nThe story so far<\/h2>\n
Appeal<\/h2>\n
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