As a result of worries that it could hinder competition in the cloud gaming market, the UK antitrust authority has halted Microsoft’s acquisition of Activision Blizzard, Microsoft Activision deal blocked by the UK antitrust regulator.
In a statement released on Wednesday, the Competition and Markets Authority expressed concern that the acquisition would result in “reduced innovation and less choice for UK gamers over the years to come.”
The regulator said that Microsoft (MSFT), which currently has a 60%–70% worldwide market share in cloud gaming, will become “even stronger” as a result of the $69 billion deal, which was first disclosed early last year.
On Wednesday, Microsoft’s stock increased 8% while Activision’s shares fell more than 11%.
Microsoft Activision deal blocked by UK trade authority
One of the top video game producers in the world, Activision Blizzard (ATVI), is responsible for titles including “Call of Duty,” “World of Warcraft,” “Diablo,” and “Overwatch.” Xbox Game Pass is a video game subscription service offered by Microsoft, the company that sells the Xbox gaming system, along with a cloud-based video game streaming service.
Antitrust authorities throughout the world are opposing the company merger transaction more and more. The US Federal Trade Commission filed a lawsuit in December to stop the takeover due to similar competition concerns. August is the date set for the hearing. The transaction is being assessed by the European Union as well.
Even while the UK ruling primarily pertains to the businesses’ operations in Britain, Alex Haffner, a lawyer at the London law firm Fladgate, said the authorities “cooperate quite closely.”
“It has potential implications for those [other regulatory] decisions as well,” he continued. Without the consent of all three agencies, it is difficult to imagine how the acquisition might proceed.
The Competition and Markets Authority noted in its decision that Microsoft may attempt to make Activision’s games exclusive to its platforms and then raise the price of a Game Pass subscription.
“The cloud provides UK gamers considerably more freedom and choice in how they play while enabling them to avoid purchasing pricey gaming consoles and PCs. Allowing Microsoft to have such a dominant position in the fast-expanding cloud gaming sector would run the danger of undercutting the innovation required to create these prospects, it was said.
According to the facts that are now available, Activision would soon begin offering games through cloud platforms even if there was no merger.
Activision and Microsoft want to appeal
Both businesses intend to challenge the judgment. Activision Blizzard CEO Bobby Kotick stated in a statement, “Alongside Microsoft, we can and will dispute this ruling, and we’ve already begun the procedure to appeal to the UK Competition Appeals Tribunal.
“This decision appears to reflect a flawed understanding of the market and the actual operation of the relevant cloud technology,” Microsoft President Brad Smith continued.
They could have little chance of winning in the tribunal, though. Because you have to demonstrate that the judgment was illogical, winning these appeals is challenging, according to competition lawyer Haffner. He told CNN, “The bar is set rather high for success.”
The UK Competition and Markets Authority has broad authority under the Enterprise Act of 2002 to halt transactions that it determines to be anti-competitive.
It has previously used this power to stop the sale of Asda stores to competitor Sainsbury’s and the acquisition of Sky News by 21st Century Fox. The regulator, which began a thorough investigation into the massive gaming contract in September, claimed that Microsoft’s suggested solutions to its issues had “significant shortcomings.”
Martin Coleman, the head of the impartial team of experts conducting the probe, said that “their proposals… would have replaced competition with ineffective regulation in a new and dynamic market.”
Coleman stated, “Microsoft already enjoys a strong position and head start over other competitors in cloud gaming, and this merger would extend that edge, giving them the chance to undercut emerging and inventive rivals. “A free, competitive market is necessary for cloud gaming to spur innovation and choice.” Microsoft Activision deal blocked, says UK antitrust regulator.
According to the Competition and Markets Authority, the UK cloud gaming business may be valued at up to £1 billion ($1.2 billion) by 2026, or around 9% of the whole market.
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