UK blocks Microsoft’s Activision Blizzard acquisition, its biggest tech deal in history

The United Kingdom’s antitrust regulator has blocked Microsoft’s proposed acquisition of Activision Blizzard, citing fears of “reduced innovation and less choice for U.K. gamers in the future.” The deal, valued at $69 billion, would have allowed Microsoft to expand its dealings in cloud gaming, a market where it already holds a global share of around 60-70%.

Microsoft contends its purchase proposal would expand access to gaming rather than hamper the development of the industry.

The company hopes that buying Activision Blizzard, which has produced some of the world’s biggest video games such as “Call of Duty” and “World of Warcraft,” would broaden access to those titles by making them available on Microsoft’s Game Pass service.

“We believe that a thorough review will show that the combination of Microsoft and Activision Blizzard will benefit the industry and players,” Microsoft Gaming CEO Phil Spencer wrote in a statement. “For all the players and game developers out there, you remain at the center of everything we do, and we will continue to listen to your feedback and do everything we can to nurture this industry we all love.”

However, regulators are worried that doing so would incentivize Microsoft to raise prices on cloud gaming subscription services like Game Pass, and even potentially withhold certain releases from rival platforms like Sony’s Playstation Plus.

“The cloud allows U.K. gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play,” the Competition and Markets Authority (CMA) wrote in its ruling on Wednesday, April 26. “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.”

The CMA said in a statement that its decision to nix the deal came after an investigation by an independent panel of experts.

The CMA’s Martin Coleman, who chaired the panel, said that allowing the deal to go through would strengthen the advantage Microsoft currently holds over its competitors in the space.

“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,” Coleman said. “Cloud gaming needs a free, competitive market to drive innovation and choice.”

Microsoft President Brad Smith responded to the decision, saying that it “appears to reflect a flawed understanding of the market and the way the relevant cloud technology actually works.”

Activision Blizzard CEO Bobby Kotick added that the two companies had already begun work on initiating an appeal of the ruling, and that the CMA’s decision would ultimately “stifle investment, competition and job creation throughout the U.K. gaming industry.” 

The CMA’s decision has been supported by the U.S. Federal Trade Commission (FTC), which is currently engaged in its own lawsuit with Microsoft regarding the deal.

A former chair of the FTC called the CMA’s move a “very big win for the broader effort to realign antitrust enforcement.” Meanwhile, antitrust regulators in the European Union are expected to deliver their own ruling on the matter soon, with that decision likely to come by May 22.