United Kingdom regulator blocks Microsoft’s proposed acquisition of Activision Blizzard due to cloud gaming concerns

United Kingdom antitrust regulator Competition and Markets Authority has made the final decision to block Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard, the outfit announced.

According to the outfit, Microsoft’s proposed solution failed to effectively address its concerns in the cloud gaming sector. The regulator believes the deal would alter the future of the cloud gaming market and lead to “reduced innovation and less choice for United Kingdom gamers over the years to come.”

Microsoft proposed the acquisition of Activision Blizzard in January 2022, and the Competition and Markets Authority launched an in-depth review of the deal in September 2022. In February 2023, the outfit determined that the deal could make Microsoft an even stronger competitor in the cloud gaming sector and stifle competition.

“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,” said Martin Coleman, chair of the independent panel of experts conducting the Competition and Markets Authority’s investigation.

“Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.

“Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”

In response to the Competition and Markets Authority’s decision, Microsoft vice chair and president issued the following statement:

“We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom. We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”

Activision Blizzard CEO Bobby Kotick also sent the following email to staff today:

Team,

Today, the Competition and Markets Authority (CMA), a regulatory agency in the U.K., decided not to approve our merger with Microsoft. This isn’t the news we wanted—but it is far from the final word on this deal.

Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the U.K. Competition Appeals Tribunal. We’re confident in our case because the facts are on our side: this deal is good for competition.

The U.K. hopes to grow its leadership position in technology, and a combined Microsoft-Activision would accomplish exactly that. At a time when the fields of machine learning and artificial intelligence are thriving, we know the U.K. market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately. By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the U.K. gaming industry.

This merger is a complex process, and I know I’m not the only one frustrated by the hurdles and delays. We’re accustomed to a company culture that moves quickly to accomplish big goals, so it’s tough when we can’t close things out at our usual energetic pace. We’ll keep pressing our case, because we know that this merger will benefit our employees, the broader U.K. tech workforce, and players around the world.

I’m going to do everything I personally can to advocate for us and help regulators understand the competitive dynamics in our industry. What gives me confidence is that, whether on our own or united with another company, we are one of the strongest companies in our industry, poised for continued growth, and building on our incredible IP.

I appreciate your continued hard work and focus, and for continuing to connect and engage our players around the world. This is the best time to be in our field, and you all represent the best of our industry. We’ll be sure to keep you updated on next steps as they happen.

With appreciation,
Bobby