Microsoft-Activision deal blocked by UK regulator over cloud gaming concerns

UK’s antitrust regulator Competition and Markets Authority (CMA) has denied approval to Microsoft’s proposed $68.7 billion bid to acquire gaming company Activision Blizzard. 

CMA said on Wednesday that it's blocking the deal over concerns that Microsoft might restrict access to Activision games, especially the Call of Duty series to rival cloud gaming services, which in turn would alter the future of the cloud gaming market and reduce innovation. 

Microsoft vice chairman and President Brad Smith said in a Twitter post that his firm is committed to the deal with Activision and will appeal the CMA ruling. 

“CMA’s decision rejects a pragmatic path to address competition concerts and discourages technology innovation and investment in the UK. The decision appears to reflect a flawed understanding of the market,” he added. 

CMA had raised several concerns, in its initial findings, over the impact of the deal on cloud gaming, multi-game subscriptions, and gaming consoles. However, it provided some relief to Microsoft last month when it revised its concerns related to competition in the console gaming market. The regulator said at that time that it wasn’t in Microsoft’s best commercial interests to restrict access to Call of Duty games to other consoles. 

Microsoft on its part also offered to sign deals with rival console providers including Sony and Nintendo to provide Call of Duty games on their consoles for the next ten years. The big tech firm signed a similar deal with Nvidia to make the game available on its cloud gaming platform for the next ten years. 

During its investigation, CMA found that Microsoft controls around 60-70% of the global cloud gaming market and also controls global cloud computing infrastructure through Azure. The deal would strengthen their dominant position in cloud gaming by giving them control over Activision games such as Call of Duty, Overwatch, and World of Warcraft. 

“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,” said Martin Coleman, chair of the independent panel of experts conducting the investigation. 

Coleman acknowledged that Microsoft cooperated with them and tried to address their concerns. However, their proposals were not effective, he added. 

CMA’s ruling stems from the belief that cloud gaming will redefine the gaming industry by changing the way games are played as it doesn’t require gamers to buy expensive consoles and PCs. This will make popular AAA games available to more gamers. 

The Microsoft-Activision deal is under investigation in several geographies including the US and EU. Last December, US Federal Trade Commission (FTC) said that it will seek to block the deal as they fear it will harm competition in the cloud as well as the console gaming industry.