UK Regulators Block Microsoft's Acquisition of Gaming Giant Activision Blizzard

The UK’s Competition and Markets Authority (CMA) has taken a decisive step to block Microsoft’s $69 billion acquisition of video gaming powerhouse Activision Blizzard, dealing a significant blow to the American tech giant.

CNBC reports that Microsoft has suffered a significant setback after the UK’s Competition and Markets Authority (CMA) acted decisively to halt its $69 billion acquisition of video game publisher Activision Blizzard. Concerns about a possible adverse effect on competition in the quickly expanding cloud gaming market were raised by the CMA.

The Activision Blizzard Booth during the Electronic Entertainment Expo in Los Angeles, June 13, 2013. Activision Blizzard agreed, Friday, Feb. 3, 2023 to pay a $35 million fine to settle federal regulatory charges that it failed to collect and respond to employee complaints of workplace misconduct and violated a federal whistleblower protection rule. (AP Photo/Jae C. Hong, File)

In January 2022, Microsoft revealed its plan to purchase Activision Blizzard, making it one of the biggest deals in the history of the video game industry. By incorporating lucrative gaming franchises like Call of Duty and Candy Crush Saga into its content offerings, the acquisition aimed to strengthen Microsoft’s position in the gaming industry.

After the CMA expressed concerns that Microsoft might make Activision’s games exclusive to its cloud gaming platform, Xbox Game Pass, cutting off distribution access to other significant industry players, the regulator made its decision.

In an attempt to resolve the CMA’s concerns, Microsoft offered remedies, including “requirements governing what games must be offered by Microsoft to what platforms and on what conditions over a ten-year period.” The regulator, however, rejected the proposals, claiming that the solutions would only be applicable to a specific group of Activision games and that there was a high likelihood that Microsoft and cloud gaming service providers would disagree and engage in conflict.

Brad Smith, vice chair and president of Microsoft, expressed dissatisfaction with the CMA’s ruling, adding that the business is still “fully committed to this acquisition and will appeal.” Activision Blizzard CEO Bobby Kotick also disclosed that both companies have already started the procedure for appealing to the UK Competition Appeals Tribunal on the grounds that the merger would increase competition.

The CMA’s ruling has additional ramifications for the global gaming market because Microsoft’s rivals opposed the transaction out of concern that it might give Microsoft a stranglehold on the $200 billion games market. Sony in particular expressed worries that Microsoft might eventually make its Xbox gaming consoles the only place to play the well-known Call of Duty franchise.

Microsoft offered 10-year contracts to Sony, Nintendo, Nvidia, and other companies in an effort to allay these worries about the future of Call of Duty on each of their respective gaming platforms. The company argued that given the licensing income generated by keeping the game accessible on their platforms, withholding Call of Duty from PlayStation, Nintendo, and other competitors would not be financially advantageous.

The conflict over the acquisition is still going on outside of the UK. Microsoft still needs to persuade additional regulators to allow the deal to go through. While the U.S. Federal Trade Commission has filed a lawsuit to stop the merger on antitrust grounds, the European Union is still looking into the merger to determine how it will affect competition.