UK Competition Markets Authority Moves to Block Microsoft Acquisition of Activision Blizzard
26/04/2023 à 12:19
The UK Competition Markets Authority has moved to
block Microsoft's $69 billion acquisition of Activision Blizzard
, citing concerns the deal would damage competition in the cloud gaming market, leading to less innovation and choice for UK gamers.
The CMA's press release
included a lengthy writeup detailing their grievances, revolving around competition within the Cloud Gaming market, citing the potential for Microsoft's dominance to stifle innovation - asserting that while beneficial to some customers, it would not outweigh the overall harm to competition and UK gamers.
Please note the quote below is condensed to selected highlights - see the full
for more detail.
Competition and Markets Authority
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.
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. 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’s proposal contained a number of significant shortcomings connected with the growing and fast-moving nature of cloud gaming services:
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.
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 post-merger to reflect the addition of Activision’s valuable games.
Activision and Microsoft are working on an appeal, with Activision Blizzard CEO
Bobby Kotick commenting
in an all-hands email - stating that this is far from the final word on the deal, and their team has already begun work to appeal to the UK Competition Appeals Tribunal.
Today, the Competition and Markets Authority (CMA), a regulatory agency in the UK, decided not to approve our merger with Microsoft. This isn’t the news we wanted – but it is far from the final word on this deal.
Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the UK Competition Appeals Tribunal. We’re confident in our case because the facts are on our side: this deal is good for competition.
The UK hopes to grow its leadership position in technology, and a combined Microsoft-Activision would accomplish exactly that. At a time when the fields of machine learning and artificial intelligence are thriving, we know the UK market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately. By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry.
This merger is a complex process, and I know I’m not the only one frustrated by the hurdles and delays. We’re accustomed to a company culture that moves quickly to accomplish big goals, so it’s tough when we can’t close things out at our usual energetic pace. We’ll keep pressing our case, because we know that this merger will benefit our employees, the broader UK tech workforce, and players around the world.
I’m going to do everything I personally can to advocate for us and help regulators understand the competitive dynamics in our industry. What gives me confidence is that, whether on our own or united with another company, we are one of the strongest companies in our industry, poised for continued growth, and building on our incredible IP.
I appreciate your continued hard work and focus, and for continuing to connect and engage our players around the world. This is the best time to be in our field, and you all represent the best of our industry. We’ll be sure to keep you updated on next steps as they happen.
Activision Blizzard CCO Lulu Cheng Meservey, who has been very outspoken throughout these proceedings, also commented to share her disappointment - calling it a major setback for UK ambitions to become a tech hub (something
Bobby Kotick also commented on previously
), and that despite all its rhetoric, the UK is now closed for business.
Comments from Microsoft
Brad Smith echoed similar sentiments
, expressing disappointment in a decision "reflect a flawed understanding of this market and the way the relevant cloud technology actually works."
In other coverage, Axios' Steven Totilo reported a potential
future deal with the UK
which may allow the merger without moving Activision content to Game Pass, but it might not necessarily happen quickly.
Even if they successfully appeal the UK authority's decision, this is far from the only or last hurdle which Microsoft and Activision Blizzard will need to pass. Florian Mueller's
FOSS Patents blog highlights these further
, alongside their own scathing opinion of this move by the UK:
The European Commission is set to make a decision on May 22nd, which could have a few different outcomes as per EC antitrust chief Margrethe Vestager.
The U.S. Federal Trade Commission is facing increased political pressure, though while Microsoft was previously expected to
close the deal despite the FTC's suit
, a trial in August now seems very likely.
Private lawsuits in the United States are also now more likely to proceed, with less pressure on time.
Regulators in Australia and New Zealand wanted to wait for outcomes in other jurisdictions.
The saga could have been over soon, but instead it looks like it could take longer than expected, if not much longer. That is a shame, but I still hope to see Microsoft's plans for a universal mobile app store materialize. That is one of the important procompetitive benefits of the transaction that the CMA, for whatever reason or no reason, doesn't seem to care about.
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