Ever since Phil Spencer announced that Microsoft was buying Activision Blizzard for $69 billion, the antitrust administrations went into overdrive.
The purchase of a giant from another giant in the same sector is something that is under close scrutiny in the United States, the United Kingdom and Europe. And for the deal to go through, the three regulatory agencies would have to give the go-ahead. Today we have the first no, when on Monday it seemed that it would.
Microsoft Corp.’s $69 billion acquisition of Activision Blizzard Inc. has suffered a major setback after Britain’s antitrust authority vetoed the biggest deal in the history of the video game industry, claiming it would harm competition in cloud gaming.
Microsoft’s claims have not convinced
The Competition and Markets Authority said its concerns “could not be resolved by remedies such as the sale of the blockbuster Call of Duty title or so-called behavioral remedies involving promises to allow rivals to offer the game on their platforms,” according to a statement today (Wednesday).
In other words, Microsoft’s assurances that PlayStation gamers would be able to continue playing Call of Duty on their PS5 for the next 10 years is not enough to negate the real possibility of harming direct rivals in their industry.
The pressure on Microsoft has been mounting as it lobbied at home and in Europe to convince regulators to clear the deal, which is one of the 30 largest acquisitions of all time.
The CMA’s findings will come ahead of decisions by the European Union and the U.S. Federal Trade Commission, which is awaiting a hearing in the summer after filing a formal complaint to veto the deal. This first one may not topple all the dominoes.
The real problem is cloud gaming, not COD.
“Microsoft already enjoys a position of power and advantage over other competitors in the cloud game, and this deal would reinforce that advantage by giving it the ability to undercut new and innovative competitors,” stated Martin Coleman, chairman of the independent think tank conducting this research.
The CMA felt the merger could lead to higher prices, less choice and less innovation for UK gamers. However, earlier this month it narrowed its original scope to focus on cloud gaming rather than consoles after weighing new evidence.
The CMA said the deal would consolidate Microsoft’s market advantage by giving it control over the blockbuster Call of Duty, Overwatch and World of Warcraft games. The watchdog felt that, without the merger, Activision could start offering games on cloud platforms in the future.
“We remain fully committed to this acquisition and will appeal,” said Brad Smith, vice chairman and president of Microsoft. “The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technological innovation and investment in the U.K.”
An agreement that very few people approve of
Since it was announced in 2022, almost the entire industry has been betting on this purchase. The power and influence it would give Activision Blizzard would put Microsoft in a dominant position within the video game industry. Like no other.
Sony was the first to object, scared that Xbox would decide to veto Call of Duty on PlayStation, but it was not the only one. Over the course of a whole year, companies and regulators have taken a dim view of the deal.
Let’s remember that Microsoft took advantage of a delicate and borderline situation on the part of Activision Blizzard (accused of having a work culture based on harassment and exploitation) to take over Bobby Kotick’s conglomerate.
Xbox is going to have a very hard time getting its way, no matter how much it relies on its own skills to convince U.S. regulators. The UK has already said no and Europe is likely to follow suit.
Microsoft is playing for its future in the gaming sector and the prize is billions of euros in profits… every year. For this reason it is not going to let go of the prey, not with how much it cost to convince the managers and how “cheap” it came out.
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