Britain will oppose Microsoft’s $69 billion acquisition of Activision Blizzard, producer of the Call of Duty video game, out of worry that the merger will reduce competition in the cloud gaming market.
The Competition and Markets Authority stated on Wednesday that Microsoft’s promise to provide major cloud gaming platforms access to Activision’s multi-billion dollar Call of Duty brand was insufficient to allay its worries.
The CMA’s decision to ban the deal, which is the largest involving technology companies, is the latest indication that the UK watchdog is prepared to take on Big Tech companies after opposing Facebook owner Meta’s acquisition of Giphy in 2021.
In response to the CMA’s statement, Microsoft’s president Brad Smith said the group remained committed to the acquisition and would appeal the decision, while Activision said it would ‘work aggressively’ with Microsoft to reverse it.
Activision’s boss Bobby Kotick told staff it was not ‘the news we wanted – but it is far from the final word on this deal’, Reuters reported.
He said in a separate statement, according to Reuters: ‘We will reassess our growth plans for the UK.
‘Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.’
Microsoft announced its Activision bid in January 2022 to bolster its firepower in a video gaming market led by Tencent and Sony.
European authorities will decide whether the Activision deal can go ahead or not by 22 May and the Federal Trade Commission is also seeking to block it.
Activision shares fell sharply today and were down over 8 per cent to around $79 shortly after markets opened in the US.
The CMA said it had concerns over the proposed deal’s impact on cloud gaming and Microsoft’s remedies.
Microsoft had already offered Sony, an opponent of the deal, a decade-long Call of Duty licence, in line with an agreement to bring the multi-billion dollar franchise to Nintendo’s Switch console.
In a statement today, Martin Coleman, chair of the independent panel of experts conducting this investigation for the CMA, said: ‘Gaming is the UK’s largest entertainment sector.
‘Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games. This means that it is vital that we protect competition in this emerging and exciting market.
‘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.
‘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.’
It said Microsoft had an estimated 60 to 70 per cent of global cloud gaming services, as well as competitive advantages like owning Xbox, PC operating system Windows and cloud provider Azure.
But, the CMA also added: ‘The CMA has today concluded that the deal may not be expected to result in a significant lessening of competition in console gaming services in the UK.’
The watchdog said the cloud gaming market was expected to be worth £11billion globally by 2026.