In an unexpected move, the UK CMA (Competition and Markets Authority) has blocked Microsoft's proposed $68.7 billion acquisition of Activision Blizzard. The CMA is citing concerns regarding cloud gaming services and competition as its principal reason for blocking the deal, and as you'd expect, Microsoft intends to appeal the decision.
The CMA announced its decision via a statement on the UK government's official website earlier today. In the statement, the CMA says that if the Microsoft-Activision Blizzard merger went through, this would reinforce Microsoft's already-strong position in the cloud gaming sector and stifle innovation elsewhere, leading to less choice for gamers when it comes to cloud gaming.
According to the CMA, Microsoft's proposed remedies for this issue contained "a number of significant shortcomings". The company's proposed solution "did not sufficiently cover different cloud gaming service business models", it was "not sufficiently open to providers who might wish to offer versions of games on PC operating systems other than Windows", and it would "standardize the terms and conditions" of games' availability rather than allowing them to be "determined by the dynamism and creativity of competition in the market".
The CMA goes on to say that it "carefully considered" whether having Activision Blizzard games on Xbox Game Pass would outweigh "the harm" the deal could cause to cloud gaming. Ultimately, the authority says it decided that this wasn't the case, and so it blocked the deal on the grounds of stifling cloud gaming competition.
This decision has been a long time coming, and it will come as a surprise for many. In February, the CMA said that the merger "could harm UK gamers", citing both cloud gaming and potential Call of Duty exclusivity (which Microsoft has repeatedly denied it intends to implement) as its reasons. Last month, the CMA said that "new evidence" had caused it to rescind its concerns that the deal would harm console gaming competition, but that it was "continuing to carefully consider" any potential risks to cloud gaming competition. It seems the CMA is done considering and has laid its cards on the table.
For its part, of course, Microsoft intends to appeal the decision. Vice chair Brad Smith issued a statement in response to the CMA's, saying that Microsoft remains "fully committed" to the acquisition of Activision Blizzard and that the company will appeal. Smith says Microsoft is "especially disappointed" that the CMA's decision "appears to reflect a flawed understanding of [the cloud gaming] market and the way the relevant cloud technology actually works".
Activision Blizzard isn't particularly happy, either. Corporate affairs executive VP Lulu Cheng Meservey called the CMA's report "a disservice to UK citizens" and said that "despite all its rhetoric, the UK is clearly closed for business". She also reiterated Activision Blizzard's intent to "work with Microsoft to reverse [the CMA's decision] on appeal".
The CMA isn't the only authority to voice concerns over the proposed Microsoft-Activision Blizzard merger. While the deal has been approved by regulatory bodies in Japan and Brazil, the US Federal Trade Commission and the European Commission have yet to deliver their own decisions. We don't know how this is all going to shake out, but one thing's for sure: the UK's decision has set the deal back significantly. Watch this space for more info.