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UK blocks Microsoft / Activision deal
The UK ’ s Competition and Markets Authority ( CMA ) has prevented Microsoft ’ s proposed purchase of Activision over concerns the deal would alter the future of the fast-growing cloud gaming market , leading to reduced innovation and less choice for UK gamers over the years to come . The final decision to prevent the deal comes after Microsoft ’ s proposed solution failed to address effectively the CMA ’ s concerns .
Microsoft entered into a $ 68.7 billion (€ 62.2bn ) deal to buy video games publisher Activision in January 2022 . The CMA launched an in-depth review of the deal in September 2022 , and in February 2023 , provisionally found that the merger could make Microsoft even stronger in cloud gaming , stifling competition . According to the CMA , Microsoft has a strong position in cloud gaming services and the evidence available showed that Microsoft would find it commercially beneficial to make Activision ’ s games exclusive to its own cloud gaming service .
Microsoft already accounts for an estimated 60 % -70 % of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox , the leading PC operating system ( Windows ) and a global cloud computing infrastructure ( Azure and Xbox Cloud Gaming ). The deal would reinforce Microsoft ’ s advantage in the market by giving it control over important gaming content such as Call of Duty , Overwatch , and World of Warcraft . The evidence available to the CMA indicates that , absent the merger , Activision would start providing games via cloud platforms in the foreseeable future .
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 , says the CMA .
Microsoft submitted a proposal to address some of these concerns which the CMA examined in considerable depth . According to the CMA , Microsoft ’ s proposal contained a
“ 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 .”
number of significant shortcomings connected with the growing and fast-moving nature of cloud gaming services . Accepting Microsoft ’ s remedy would inevitably require some degree of regulatory oversight by the CMA . By contrast , preventing the merger would effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention .
The CMA carefully considered whether the benefit of having Activision ’ s content available on Game Pass outweighed the harm that the merger would cause to competition in cloud gaming in the UK . The CMA found that this new payment option , while beneficial to some customers , would not outweigh the overall harm to competition ( and , ultimately , UK gamers ) arising from this merger , particularly given the incentive for Microsoft to increase the cost of a Game Pass subscription postmerger to reflect the addition of Activision ’ s valuable games .
“ Gaming is the UK ’ s largest entertainment sector ,” stated Martin Coleman , chair of the independent panel of experts conducting this investigation . “ 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 ,” he concluded .
Brad Smith , vice chairman and president of Microsoft , confirmed that the company was still committed to the acquisition . “ The CMA ’ s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom ,” he said , noting that Microsoft had already signed contracts to make Activision Blizzard ’ s games available on 150 million further devices . “ 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 CMA ’ s report contradicts the ambitions of the UK to become an attractive country to build technology businesses ,” claimed a spokesperson for Activision , confirming that the company would “ work aggressively ” with Microsoft to reverse the decision on appeal . “ The report ’ s conclusions are a disservice to UK citizens , who face increasingly dire economic prospects . 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 .”
The European Commission has opened an in-depth investigation to assess the proposed deal under the EU Merger Regulation . The Commission is concerned that the proposed acquisition may reduce competition in the markets for the distribution of console and PC video games and for PC operating systems .
In addition , the US Federal Trade Commission has authorised an administrative complaint against the proposed merger . The agency alleges that the deal would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription and cloud-gaming business .
6 EUROMEDIA