Today, the Competition and Markets Authority (CMA) in the United Kingdom announced that it will block Microsoft’s purchase of Activision Blizzard over concerns the deal would be anticompetitive in the cloud gaming market, citing that the overall harm to competition (and, ultimately, U.K. gamers) arising from this merger would outweigh the benefit of having Activision’s content available on Game Pass.
The CMA’s finding still needs to be approved by regulators in other countries and the European Union, with its decision to be released by late May. In the United States, Microsoft is also facing an ongoing investigation from the Federal Trade Commission (FTC) which sued to block Microsoft’s Activision Blizzard purchase last year.
The $68.7 billion merger Microsoft proposed in January 2022 would have seen several of Activision titles on their gaming subscription service, Xbox Game Pass, which is currently available on the iPhone and iPad through Safari, but not the App Store. Apple allows all-in-one gaming subscription services, but each game must be submitted and approved through the App Store review process.
Martin Coleman, chair of the independent panel of experts who conducted the investigation, said that 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 proposed various remedies in an effort to try and address these issues, however the CMA found them not to be effective to remedy their concerns and would have replaced competition with ineffective regulation in a new and dynamic market.
It is likely that if the CMA’s decision holds, Microsoft will have to pay Activision a $3 billion break-up fee in order to prevent the merging of the two companies.
There is several reasons why this decision to block Microsoft’s takeover of Activision Blizzard is important: It would allow for existing competitive dynamics in the cloud gaming space to continue, meaning gamers can benefit from increased innovation, better services, pricing and selection; it would prevent Microsoft from having an even stronger market presence that could lead to anticompetitive practices that would not deliver the best benefit for gamers; and it would maintain the space for rivals to appear and outperform each other to create better and more innovative products for consumers.
This decision is just the latest proof of the important role regulators can play in protecting consumers and stopping anticompetitive behaviour from firms with the power to potentially dominate markets and reduce choice. Comment and let us know your thoughts.