UK regulator blocks Microsoft’s $68.7B acquisition of Activision Blizzard

The United Kingdom’s Competition and Markets Authority (CMA) regulatory agency voted to block Microsoft’s $68.7 billion acquisition of Activision Blizzard.

The CMA said it was concerned about the deal’s impact on competition in the cloud gaming market, where Microsoft has a product offering. It said it would likely lead to reduced innovation and less choice for gamers in the U.K.

The ruling came despite rumors that the CMA was being swayed by Microsoft’s own arguments saying it would still share games like Call of Duty with its competitors.

“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,” the agency said after reviewing the deal for months.

It noted that Microsoft would have 60% to 70% of global cloud gaming services thanks to Xbox, Windows and Azure. It did not note that the revenue from this service is currently a pittance. But it said cloud gaming is an important and fast growing part of the market.

Microsoft had promised it would make its tech available to competitors for 10 years, but the agency found that to be insufficient. Activision Blizzard CEO Bobby Kotick said in a note to employees that the company was already preparing an appeal.

“We remain fully committed to this acquisition and will appeal,” said Brad Smith, vice chair and president of Microsoft. “The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom. We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”