Fifteen months after Microsoft started its journey to join forces with Activision Blizzard, another boss is now standing in its way.
The UK’s Competition and Markets Authority (CMA) issued a final decision Wednesday to prevent the tech giant from proceeding with the $69 billion deal, joining the U.S. Federal Trade Commission in formally opposing what would be the largest acquisition in the history of video games.
The CMA said Microsoft’s proposed remedies weren’t enough to overcome cloud gaming antitrust concerns.
“The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play,” the CMA said in a news release. “Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.”
Microsoft, which is already battling the FTC in U.S. federal court, vowed to appeal the UK decision, as well. The Redmond, Wash.-based company remains “fully committed to the acquisition,” despite the latest setback, Microsoft President Brad Smith in a statement Wednesday morning.
“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,” Smith said, citing Microsoft’s efforts to expand the availability of Activision Blizzard games to 150 million additional devices.
He added, “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.”
The acquisition, if completed, would see one of the top 10 video game companies in the world buy the single largest independent publisher. Ownership of Activision Blizzard would catapult Microsoft ahead of Sony into the #2 position worldwide, behind the Chinese technology firm Tencent.
Several countries have already given the go-ahead to Microsoft, including Japan, Chile, Brazil, Saudi Arabia, Serbia, and as of April 17, South Africa.
In March, the European Union signaled that Microsoft had made sufficient concessions, such as its willingness to offer licensing deals to competitors such as Nintendo, to address the concerns it had raised in court.
The acquisition has faced its fiercest opposition in the U.S. and Britain.
However, the CMA had signaled in late March that it had received “new data” that removed some of its previous objections to Microsoft’s deal. Specifically, its argument – that Microsoft could financially benefit from making popular Activision Blizzard games like Call of Duty unavailable on the PlayStation platform – was contradicted by its updated analysis of CoD players’ financial behavior.
Earlier this week, a report in the Financial Times generated fresh speculation that the UK would approve the deal.
But with its final decision, the CMA now formally joins the FTC in opposition to the acquisition. The FTC sued Microsoft in December 2022 to block the deal, on the basis that Microsoft has a “record of acquiring and using valuable gaming content to suppress competition from rival consoles.”
This fits with a larger agenda by FTC Chair Lina Khan, who has pursued multiple big tech companies over monopolistic or anti-consumer practices since taking the seat in 2021. A deal like the Activision Blizzard acquisition, as a merger between two industry leaders, is a perfect target for Khan.
The lawsuit has drawn bipartisan scrutiny from U.S. lawmakers, primarily on the basis that it sets the FTC up as having sided with Sony, a foreign company and the industry leader in the gaming console market, over Microsoft, which has been stuck in second place in that market for over a decade.
Sen. Maria Cantwell (D., Wash.) alleged in a Senate Finance Committee meeting in March that Sony itself is allowed to “engage in anti-competitive conduct” in Japan due to unspecified deals with the Japanese government. Sony’s PlayStation 5 video game console has roughly a 24-to-1 sales lead over the Xbox in Japan.
Sony, Microsoft’s chief competitor in the console market, has been vocal in its opposition to the Activision Blizzard acquisition, alleging to the CMA on April 6 that Microsoft could deliberately sabotage games’ performance on the PlayStation.
A group of private consumers also attempted to stop Microsoft’s Activision Blizzard deal via an antitrust lawsuit, filed in San Francisco in December. That lawsuit, which claimed the acquisition would raise game prices and harm innovation, was quietly dismissed by a federal judge in March on the basis of insufficient allegations.
