Why the U.K.’s Decision to Block Microsoft/Activision Merger Is Such a Big Deal
The U.K.’s Competition and Markets Authority (CMA) has blocked Microsoft’s purchase of Activision Blizzard, a move which has enraged both parties yet could potentially prevent further monopolization. Activision Blizzard, probably best known for producing the Call of Duty franchise—one of the most valuable titles in the gaming sector—was to be bought by Microsoft for a whopping $69 billion, or roughly £55 billion in the U.K.
Interestingly enough, the CMA didn’t base its ruling on the effect the acquisition might have on the console market but rather focused its efforts on the newly emerging cloud-based gaming market, which it says is one of the fastest-growing industries in the U.K. and around the world. The CMA says that Microsoft accounts for roughly 60-70% of global cloud gaming services and already has a stronger-than-average position in the market because of Xbox, Windows, Azure, and Xbox Cloud Gaming.
Though Microsoft had offered to make some Activision games—think Call of Duty, Overwatch, and World of Warcraft—available on several other cloud platforms like Nvidia, Boosteroid, and Ubitus, the CMA said this wasn’t enough: “(Microsoft’s) proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.” It also said, “Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.”
In response to the ruling, Brad Smith, Microsoft’s president, said that it was the “darkest day in our four decades in Britain,” and that the decision would “discourage innovation and investment in the United Kingdom. And I think in that sense, the impact of this decision is far broader than on Microsoft or this acquisition alone. People’s confidence in technology in the United Kingdom has been severely shaken.”
But the CMA rightfully considered the consumer experience over Microsoft’s feelings in their decision. Martin Coleman, chairman of the independent panel of experts that conducted the investigation, said that “Cloud gaming is growing fast with the potential to change gaming by altering the way games are played, freeing people from the need to rely on expensive consoles and gaming PCs and giving them more choice over how and where they play games. This means that it is vital that we protect competition in this emerging and exciting market.”
The merger of Microsoft and Activision Blizzard is potentially the biggest deal in tech, ever. Now that the U.K. has blocked the deal, its prospects in the U.S. and the EU have become more tenuous than previously expected. Though both Microsoft and Activision have said they will appeal the CMA’s decision, a deal that was previously expected to pass without issue has now become much more complicated.
Europe has been a leading force in the effort to reign in the power of Big Tech companies. Just a day before the CMA’s decision, the British government revealed draft legislation that would “give regulators more power to protect consumers from online scams and fake reviews and boost digital competition,” as reported by the LA Times.
And this isn’t the first time the U.K. has prevented a similar Big Tech merger–previously, it blocked Meta’s purchase of Giphy over similar fears of limiting competition and innovation. Meta lost its appeal and was subsequently forced to sell off the GIF-sharing platform.
Though it’s currently unclear how the CMA’s decision will affect the merger and the Big Tech industry as a whole, it has certainly thrown a wrench in Microsoft’s plans.
(via gov.uk and Reuters, featured image: Chesnot/Getty Images)
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