The big video game merger between Microsoft and Activision Blizzard has been blocked by the UK

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Microsoft’s massive $69 billion acquisition of video game giant Activision Blizzard received a major blow this week and possibly the end of the game. The UK’s Competition and Markets Authority (CMA) announced on Wednesday that it had decided not to allow the deal.

While that’s not the final word, Microsoft and Activision have at least one more life, as they can and will appeal, it’s now truly an uphill battle. It shows how while some US efforts to curb Big Tech have failed, other countries are getting results. The CMA ruling only applies to the UK, but the global nature of the gaming business means its decision will likely be global too.

While Microsoft and Activision Blizzard are both major players in the gaming industry and shouldn’t have much trouble pursuing separately, this development hurts their ambitions to go even bigger. At the time of the merger announcement in January 2022, Microsoft said the deal would make it the world’s third-largest gaming company by revenue, behind Tencent and Sony. But there were concerns from gamers (and Microsoft’s competition) that the company would make Activision titles exclusive to its own platforms now or in the future, locking them into the Microsoft ecosystem or forcing them to switch to it if they wanted to continue playing. to their favorite Activision. Games.

The decision of the British authorities is also an obstacle that Microsoft did not expect. Microsoft has spent years trying to build its reputation as a good Big Tech company that plays nice with others, including governments. But it boldly made the largest acquisition in its history at a time when Big Tech companies are under more scrutiny than ever. This rebuke is the most telling signal that regulators aren’t buying into Microsoft’s big move, and if they can’t stop it in the US, they will elsewhere. And if they’re willing to hit Microsoft, they’ll go for anyone.

For its part, Microsoft has hit back with not-so-veiled threats about how the CMA’s decision will hurt the UK economy, as it will cause it and possibly others to reconsider their dealings in the country.

Microsoft vice president and chairman Brad Smith told the BBC that this decision, I have to say, is probably the darkest day in our four decades in Britain and that the European Union is a more attractive place to start a business than the United Kingdom.

Activision Blizzard’s release was similar. In a statement, the company said: “The report’s findings are a disservice to UK citizens, who face an increasingly dire economic outlook.” We will be reviewing our growth plans for the UK. Global innovators large and small will take note that for all its rhetoric, the UK is clearly closed for business.

What that means for players is that assuming the CMA’s decision stands, nothing will really change. They won’t have to worry about being banned from their favorite Activision Blizzard games if they’re not Xbox or PC users, or Microsoft refuses to make new versions of those games for non-Microsoft systems and platforms. Microsoft had struck deals to keep some of those titles platform-agnostic for a number of years to try to win regulatory approval, but rivals like Sony (which clearly has its reasons for not wanting a big competitor to get any sort of advantage) argued that those concessions were not sufficient.

While Microsoft has repeatedly argued that the merger, while huge, still wouldn’t make it the dominant player in a crowded market, the CMA’s reasoning for rejecting the deal was that it would make Microsoft too powerful in a subset of that market: cloud gaming. Microsoft has its Xbox Cloud Gaming and PC Game Pass offerings, and it has the Azure cloud computing platform. The UK regulator said cloud gaming is a rapidly growing segment of the gaming industry and that Microsoft’s deal would give it too much of an edge over competitors. The CMA cited fears that Microsoft would have to raise the price of its Game Pass subscriptions to account for the tens of billions of dollars spent acquiring Activision, that it would make Activisions titles exclusive to its own services, and that games weren’t open to computers that did not have Windows operating systems.

Cloud gaming needs a free and competitive marketplace to drive innovation and choice. This is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job, said Martin Coleman, who chaired the panel that investigated the deal.

The decision came as somewhat of a surprise, given that regulators in other countries have endorsed it and the Financial Times said just days ago that the CMA should back it. Microsoft believed it had done whatever it took to get the green light, noting that it had signed multi-year agreements with several cloud gaming providers and platforms to make or continue to make Activision games available to its users. The CMA said it appreciated the effort, but it wasn’t enough.

The CMA was right to dismiss Microsoft’s efforts to settle the probe with behavioral engagements, which are difficult to monitor and easily outpaced by developments in fast-moving markets, the Open Markets Institute, an advocacy group, said in a statement. anti-monopoly, adding that it urges other competition authorities looking into this deal to take the CMA initiative and block it outright.

Activision Blizzard CEO Bobby Kotick issued a statement of his own, saying, in part, that the decision by UK regulators was far from the final say on this deal and that he was frustrated with the hurdles and delays. .

Until now, it looked like the biggest threat to the Microsoft deal would come from the United States, as its Federal Trade Commission, chaired by antitrust hawk Lina Khan, has sued to block the merger. But there was no guarantee that the FTC would win that case, and the onus would be on the agency to prove that the merger will unfairly hurt competition before courts that tend to rule in favor of businesses. We’re still waiting for the European Union’s decision on the merger, but the EU’s competition regulator, the European Commission, has been very vocal about its desire to check the power of Big Tech.

While Microsoft and Activision said they were surprised by the UK’s decision, there is some precedent. The CMA also blocked Meta’s $315 million acquisition of Giphy in 2021. That decision was confirmed in late 2022, forcing Meta to divest itself of the GIF database and search engine. Microsoft clearly thought they knew enough and did enough to make this work. It now appears that the UK Competition and Markets Authority will be its last boss fight.

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