The UK’s Competition and Markets Authority (CMA) has rejected Microsoft’s $68.7 billion acquisition of Activision Blizzard. The CMA has decided that the transaction might alter the future of the fast-growing cloud gaming market, leading to reduced development and less choice for UK gamers over the years to come after months of analysis including three million documents from Microsoft and Activision as well as more than 2,100 documents from the public.
The ruling is a setback to Microsoft’s intentions of acquiring Activision Blizzard, and if an appeal is rejected, it will probably prohibit the corporation from concluding its significant transaction.
CMA said, “Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.”
According to the CMA, Microsoft owns 60 to 70 per cent of worldwide cloud gaming services, and controlling Call of Duty, Overwatch, and World of Warcraft would give Microsoft a huge dominance in the cloud gaming market.
In the period leading up to this decision, Microsoft worked to address concerns about cloud gaming. After striking a similar deal with Nintendo in December, Microsoft secured cloud gaming deals with Boosteroid, Ubitus, and Nvidia to let Xbox PC titles run on these rival cloud gaming services. If the agreement is authorised by regulators, these 10-year contracts will also include access to Call of Duty and other Activision Blizzard games.
The CMA says it has investigated these deals, but they have “a number of significant shortcomings” in cloud gaming services. According to the CMA, the agreements are “too limited in scope,” with players to obtain the right to play games “by purchasing them on certain stores or subscribing to certain services.” The deals did not include agreements for Microsoft to provide access to these games in rival multi-game subscription services, nor did they cover the ability for rivals “to offer versions of games on PC operating systems other than Windows.”
An appeal from Microsoft will delay the company’s ambitions to close this purchase by the end of July. Microsoft had expected to complete the deal by 18 July, but will now have to seek an extension to the merger agreement. If Microsoft’s CMA appeal is rejected or it does not receive clearance from other agencies, it will be obligated to pay Activision $3 billion in breakup fees.
The acquisition has been authorised by regulators in Saudi Arabia, Brazil, Chile, Serbia, Japan, and South Africa. The EU is expected to make a judgement by 22 May, following the licensing agreements with Nvidia and Nintendo, the deal is expected to be authorised by EU regulators.