The UK’s CMA has blocked Microsoft’s acquisition of Activision Blizzard

The UK's competition watchdog announced it's blocking the deal, citing cloud gaming concerns

The UK’s Competition and Markets Authority has blocked Microsoft’s acquisition of Activision Blizzard after a year of speculation and scrutiny. The regulator claims that Microsoft’s dominance in the game streaming space is the primary reason for its blocking the deal, saying that Microsoft has too much of an incentive to make games exclusive to its streaming services.

A lengthy statement from the CMA goes into much more detail about its concerns, but the rub of it is that games like Call of Duty, Overwatch, and World of Warcraft would collectively give Microsoft too much advantage in the game streaming market.

“Microsoft has a strong position in cloud gaming services, and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service,” the CMA says in its statement.

Microsoft submitted a remedy proposal to the CMA in an attempt to smooth over these concerns, but the CMA has found Microsoft’s arguments to be lacking. The CMA says that the multiple 10-year deals the company made with other services and manufacturers are behavioral remedies, meaning the CMA and other regulators would need to continue regulating the deal in perpetuity.

The CMA offered three primary reasons for its opposition to these remedies, listed below and taken from its statement on the matter:

• 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.
• It would standardise 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, as would be expected in the absence of the merger.

Martin Coleman, who chaired the independent panel of experts conducting the investigation, said: “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.”

Notably, the CMA does not seem to have any major concerns about the console aspect of the acquisition, which aligns with its previous stance on the matter in its preliminary reports.

Microsoft has said it plans to appeal the decision, with Microsoft vice chair and president Brad Smith saying the company is “fully committed to this acquisition.”

The CMA’s decision is a huge blow to the deal, which now looks much less uncertain. It faces scrutiny from multiple other regulators throughout the world, including the European Commission and the United States Federal Trade Commission.