The UK government’s Competition and Markets Authority (CMA) has announced that it has “prevented” Microsoft’s proposed acquisition of Activision Blizzard – a move that’s sent a shockwave through the gaming industry.
In a press release concerning the planned acquisition, the CMA stated that it has “prevented Microsoft’s proposed purchase of Activision over growing 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.”
Microsoft’s proposed acquisition of Activision Blizzard has been drawing scrutiny from government bodies worldwide, with many stating concerns that the proposed merger would give Microsoft an unfair market advantage. The Federal Trade Commission in the United States still has a pending lawsuit against Microsoft on the grounds that the tech giant is breaching antitrust laws and may be on the verge of creating a monopoly. The first hearing is due to take place August 2.
In a report available on the UK government’s website, the CMA elaborated on its position: “We have concluded that the merger would result in the most powerful operator in the fast-developing market for cloud gaming, with a current market share of 60-70%, acquiring a portfolio of world-leading games with the incentive to withhold those games from competitors and substantially weaken competition in this important growing market.”
Do not pass “Go”
The CMA’s decision has put a major spanner in the works for Microsoft, which, anticipating the CMA’s approval, was planning to close the merger deal within a matter of days (via New York Post). It now seems that Microsoft will have no choice but to directly address the FTC’s concerns once the hearing arrives in August.
However, the CMA did clarify that there are measures Microsoft could implement that might alleviate the government watchdog’s concerns. In its report, the CMA found that Microsoft’s proposed remedy to the problem of monopolization relied too heavily on a system of “regulatory obligations”, such as Microsoft and Ninendo’s historic Switch deal.
It now seems that Microsoft will have to directly address the FTC’s concerns
The report concluded that these sorts of agreements would, in the context of a “rapidly evolving” market, could develop “in a range of different ways over time” and lead to unforeseen consequences that could well be detrimental to consumers.
However, if Microsoft were to address these concerns with a new proposal, it is certainly possible that the merger could still be approved in a new form later on down the line.
Do not collect 69 billion Dollars
In the meantime, both Microsoft and Activision Blizzard seem resolute in their commitment to the merger. Activision Blizzard made an official media statement outlining its desire to “work aggressively with Microsoft to reverse this on appeal.” The statement continued: “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.”
However, despite Activision’s saber rattling, the CMA’s decision is likely a positive turnabout for the video games industry. The CMA found that, as things stand, Microsoft owns 60-70% of the cloud-based gaming market in the UK. Though undoubtedly a great deal at the time of writing, the acquisition of Activision Blizzard could allow the likes of Xbox Game Pass to establish a stranglehold on the market, leading to jacked-up prices.
The CMA’s decision is likely a positive turnabout for the video games industry
That being said, the CMA was satisfied with Microsoft’s efforts to prevent the monopolization of the “console gaming services” space. Microsoft’s commitment to providing Call of Duty to Nintendo platforms after the merger, as well as the CMA found that “Microsoft would not find it financially beneficial to make CoD exclusive to Xbox”, did a great deal to assuage concerns when it comes to the console market. On this basis, it is possible that Microsoft could successfully acquire Activision Blizzard at a later date if it were to implement similar tactics when it came to cloud gaming.
The CMA has made its position clear, and the ball is very much in Microsoft’s court.
