Microsoft’s $69 Billion Merger With Activision Blizzard Has Been Blocked In The UK
After walking back on its earlier findings, the UK Competition and Markets Authority (CMA) once again does a full 180 as it formally rules against Microsoft and Activision Blizzard’s high-profile merger. According to the CMA, the merger, valued at almost $70 billion USD, could “alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.”
“Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors,” the CMA reported. “Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.”
“Cloud gaming needs a free, competitive market to drive innovation and choice,” the regulatory body added. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”
Despite efforts to address concerns from regulators and competitors, the CMA remained unconvinced, leaving Activision-Blizzard in a tough spot, with its Q1 2023 financials due to be released tomorrow. The company’s stock has taken a beating, plummeting by as much as 10% in response to the news. Activision-Blizzard’s CEO, Bobby Kotick, tried to reassure employees, saying that the ruling was “far from the final word on this deal.”
“Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the UK Competition Appeals Tribunal,” Kotick wrote in a statement to staff. “We’re confident in our case because the facts are on our side: this deal is good for competition. The UK hopes to grow its leadership position in technology, and a combined Microsoft-Activision would accomplish exactly that.”
“At a time when the fields of machine learning and artificial intelligence are thriving, we know the UK market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately,” he continued. “By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry.”
“This merger is a complex process, and I know I’m not the only one frustrated by the hurdles and delays. We’re accustomed to a company culture that moves quickly to accomplish big goals, so it’s tough when we can’t close things out at our usual energetic pace. We’ll keep pressing our case, because we know that this merger will benefit our employees, the broader UK tech workforce, and players around the world,” he concluded.
Microsoft, the other company involved in the proposed merger, has stated that it will appeal the CMA’s decision. Brad Smith, Microsoft's president, took a swipe at the CMA’s “flawed understanding” of cloud technology and the games market. Despite this setback, it remains to be seen whether the two companies can still find a way to make the deal work.
We remain fully committed to our acquisition with @ATVI_AB and will appeal today's determination by the CMA. Here's our statement. pic.twitter.com/ylvDP5RUqQ
— Brad Smith (@BradSmi) April 26, 2023
