UK blocks Microsoft’s planned $68.7B Activision bid, saying it would ‘substantially weaken competition’Reading Time: 3 minutes
The U.K.’s Competition and Markets Authority (CMA) has confirmed that it intends to block Microsoft’s megabucks Activision acquisition, concluding that such a merger would create ‘…the most powerful operator’ in the cloud gaming market.
The CMA noted that with Microsoft’s current share of 60-70% of the U.K. cloud gaming market, acquiring Activision’s portfolio of games would ‘substantially weaken competition.’ It added that Microsoft would also have the incentive to withhold such games from competing gaming platforms.
The story so far
By way of a brief recap, Microsoft first revealed plans to buy Activision in a whopping $68.7 billion deal last January, a move that would essentially make Microsoft the third-largest gaming company in the world by revenue behind Tencent and Sony, while giving it direct control over mega-franchises such as Call of Duty and World of Warcraft.
Last July, the CMA confirmed it was launching an antitrust investigation into the deal, then two months ago the regulator gave the strongest indication yet that it was gearing up to block the merger when it provisionally concluded it ‘could harm U.K. gamers’ by creating higher prices, fewer choices, and less innovation. Then last month, the CMA narrowed its position to focus entirely on cloud gaming, rather than console gaming.
This is a position that the CMA has confirmed today, noting that while Microsoft could damage its closest competitor in the console market by withholding Call of Duty from Sony’s PlayStation, it believed that Microsoft would be ‘unlikely to do so.’ It said this was because PlayStation has a ‘large and profitable user base that regularly buys Call of Duty,’ and that losses from reduced sales to PlayStation users would outweigh any gains Microsoft were to attain from gamers switching to Xbox.
With cloud gaming, however, the CMA notes that Microsoft’s market advantage owing to the proliferation of Windows and its ‘significant cloud infrastructure’ businesses would give it a strong foundation on which to gain an unfair advantage if it were to acquire Activision Blizzard’s titles.
‘No other cloud gaming operator has this combination of advantages,’ the CMA wrote. ‘Some of these strengths are already reflected in Microsoft’s current UK market share of cloud gaming of between 60-70%.’
Microsoft vice chair and president Brad Smith issued a statement immediately after the CMA published its final position today, saying that Microsoft intends to appeal the decision while pointing to recent moves it has made to alleviate competition concerns, which includes signing deals that would make Activision Blizzard games available on rival devices. Smith wrote:
Indeed, Microsoft has made various commitments toward keeping Activision games on rival platforms including Sony, Nintendo, and Steam for a 10-year period. However, the CMA has taken the position that Microsoft’s proposals can’t replace the existing ‘competitive dynamism,’ and would merely compensate for the loss of competition through ‘obligations that would regulate its behaviour’ for 10 years only.
The CMA wrote:
Activision Blizzard, for its part, does not mince its words in response to today’s news. A spokesperson said that the CMA’s report ‘contradicts the ambitions of the U.K. to become an attractive country to build technology businesses,’ adding that it will ‘work aggressively with Microsoft’ to appeal the decision.
‘The report’s conclusions are a disservice to U.K. citizens, who face increasingly dire economic prospects,’ the spokesperson said. ‘We will reassess our growth plans for the U.K. Global innovators large and small will take note that — despite all its rhetoric — the U.K. is clearly closed for business.’
It’s worth noting that the acquisition faces scrutiny in other regions around the world, including the European Union (EU) which has been mulling an in-depth probe for some time already. The European Commission (EC) had previously set a provisional deadline of 25th April to announce a decision, but this was recently moved to May 22 following further remedies offered by Microsoft.
In the U.S., meanwhile, the Federal Trade Commission (FTC) is suing to block the deal, though Microsoft recently secured a dismissal in a separate private antitrust lawsuit brought about by gamers.
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