In a surprising move, British antitrust regulators have halted Microsoft’s $69 billion acquisition of video game maker Activision Blizzard. This decision, considered the largest tech deal in history, raises concerns about stifling competition, particularly in the rapidly growing cloud gaming market. The Competition and Markets Authority (CMA) issued its final report, asserting that the “only effective remedy” to address significant competition loss is to prohibit the merger. Both companies have expressed intentions to appeal this decision.
The all-cash deal, announced 15 months ago, faced opposition from Sony, the maker of the PlayStation gaming system. Concerns were also under scrutiny by regulators in the United States and Europe, fearing that Microsoft, along with its Xbox console, would gain control of popular franchises like Call of Duty and World of Warcraft.
The UK watchdog’s decision surprised many and adds a layer of global uncertainty to the deal. Liam Deane, a game industry analyst, highlighted the potential impact on Microsoft and Activision, noting that a wrong decision from the European Commission in the coming weeks could exacerbate the situation.
The CMA’s concerns primarily revolved around the impact on cloud gaming, which allows gaming on various devices without the need for expensive consoles or gaming computers. Protecting competition in this emerging market is crucial, given the potential of cloud gaming to revolutionize the gaming industry by providing users with more choices in how and where they play.
This decision further reinforces Europe’s role as a global leader in efforts to regulate Big Tech companies. Microsoft’s hopes for a favorable outcome to help resolve a lawsuit brought by the US Federal Trade Commission are now uncertain. Activision criticized the decision, claiming it sends a negative signal to international investors, while Microsoft expressed disappointment and emphasized its commitment to the acquisition.
The move by British regulators follows their previous intervention in Big Tech deals, such as blocking Meta’s acquisition of Giphy. Microsoft had attempted to address concerns by striking deals with Nintendo and some cloud gaming providers to license Activision titles for ten years, but these efforts did not sway the regulators’ decision. The cloud gaming market, although currently a small portion of the UK’s video game market, is anticipated to experience significant growth in the coming years.
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