The UK Will Block Microsoft’s Activision Blizzard Deal

It is official. Microsoft’s $69 billion deal has been blocked in the UK. Microsoft will not be given permission to acquire Activision Blizzard at this moment. The regulatory body released its findings this morning, and while they do not believe the deal will lessen competition in console gaming, they believe the deal will decrease competition in cloud gaming. The CMA released its summary of the decision in an update.

The Competition and Markets Authority (CMA) has found that the anticipated acquisition (the Merger) of Activision Blizzard, Inc. (Activision) by Microsoft Corporation (Microsoft) (together, the Parties) may not be expected to result in a substantial lessening of competition (SLC) in console gaming services in the UK. However, the CMA has found that the Merger may be expected to result in an SLC in cloud gaming services in the UK.”

This decision is a major blow to Microsoft in its quest to grow its gaming service and expand its Game Pass offerings. Microsoft’s bid to acquire Activision Blizzard is in large part driven by the potential to own the Call of Duty franchise, one of the largest gaming franchises in the world, and a game series that would have been a significant boost to Game Pass. 

These concerns over cloud gaming are the sole reason for the acquisition to be blocked. The CMA believes that it would not be beneficial to make Call of Duty console exclusive, but that they could make Activison Games exclusive on Microsoft’s own cloud platforms, withdrawing it from other cloud services, such as Geforce now and Luna.

The CMA also found Microsoft’s remedies, such as its deals to bring Call of Duty to Geforce Now and Nintendo, insufficient. This decision was unexpected. Last month, the CMA found that it had no evidence that the acquisition would lessen competition in the UK, although they were further studying the impact of the deal on cloud gaming.

It seems that the CMA is unconvinced that the deal would not affect the cloud gaming market. We will wait and see what happens next. The Financial Times reported earlier this week that the CMA was likely to approve the deal today. The winds that blew pointed in that direction, and it really seemed like the regulatory body would approve of the deal. 

Microsoft and Activision have responded to the decision. “The CMA’s report today is a major setback for the UK’s ambition to become a tech hub, and we will work with Microsoft to reverse its appeal,” Said Activision executive Lulu Cheng Meservy. Microsoft would appeal the decision, according to Microsoft VP Brad Smith 

Microsoft will appeal the decision by the CMA. pic.twitter.com/gqcStBnA8F

— Klobrille (@klobrille) April 26, 2023

Microsoft will appeal the decision, which itself could be a long and tough process. Microsoft still needs approvals from regulators in the US and in the EU, who are set to make their final decisions as early as next month. If the appeal is unsuccessful, then the Activision Blizzard deal is as good as dead. Despite this, Microsoft is determined to close the deal.