Microsoft's proposed acquisition of video game developer Activision Blizzard has been blocked by the UK's antitrust regulator, the Competition and Markets Authority (CMA). The regulator expressed concerns that the deal, which was valued at $69 billion when it was announced in early 2021, would lead to reduced innovation and less choice for UK gamers in the years to come. Activision Blizzard is responsible for some of the world's most popular video games, including "Call of Duty," "World of Warcraft," "Diablo," and "Overwatch."
Microsoft already has a 60%-70% share of the global cloud gaming market, and the acquisition of Activision Blizzard would make it even stronger in this sector. However, the CMA's decision highlights growing opposition to the deal from antitrust regulators worldwide. The US Federal Trade Commission sued to block the takeover in December 2021 over similar competition concerns, with a hearing scheduled for August. The European Union is also currently evaluating the transaction.
The CMA's decision is significant, as it has the power to block deals that it deems harmful to competition. It has used this authority in the past to block 21st Century Fox's takeover of Sky News and the sale of Asda supermarkets to rival Sainsbury's. The regulator launched an in-depth review of the Microsoft-Activision Blizzard deal in September 2021 and found that Microsoft's proposed remedies to its concerns had "significant shortcomings."
The panel of independent experts conducting the investigation pointed out that 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. The UK cloud gaming market is expected to be worth up to £1 billion ($1.2 billion) by 2026, accounting for around 9% of the global market, according to the CMA.
Both Microsoft and Activision Blizzard plan to appeal the decision, but their chances of success may be slim. The bar for success in appeals against the CMA's decisions is set quite high, requiring proof that the decision was irrational. Nonetheless, the UK regulator's decision is a significant obstacle for the deal, and the companies will need approval from all three regulators worldwide to proceed.