Microsoft-Activision: $68.7 Billion Takeover Blocked by U.K. Regulator
The U.K.’s Competition & Markets Authority has blocked Microsoft’s proposed $68.7 billion deal to buy video games giant Activision.
The Competition and Markets Authority published its final decision on Wednesday. It explained that it had “prevented Microsoft’s proposed purchase of Activision over concerns the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”
Microsoft entered into a $68.7 billion deal to buy Activision, one of the most popular video games publishers in the world, in January 2022. The CMA launched an in-depth review of the deal in September 2022.
In February this year, the CMA published provisional findings suggesting that the proposed deal would have stifled competition. Those early findings gave Microsoft a chance to offer remedies to the issues that the CMA highlighted.
However on Wednesday, the CMA said, “Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector.
Earlier, in the U.S., the Federal Trade Commission has filed an anti-trust lawsuit attempting to stop the deal which it alleged would let Microsoft “suppress competitors” in the sector.
In its Wednesday statement the U.K.’s CMA explained its analysis of the problem with the deal.
“Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).
“The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as ‘Call of Duty,’ ‘Overwatch’ and ‘World of Warcraft.’ The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.
“The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play. Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.”
Microsoft’s proposed remedy “set out requirements governing what games must be offered by Microsoft to what platforms and on what conditions over a ten-year period.” The regulator described these as ‘behavioral,’ meaning that they act against the business’s commercial interest and require ongoing regulation, replacing market forces.
The CMA said that the Microsoft proposal had “significant 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,” the CMA said. And, “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.”
– More to follow.
