UK regulator doesn’t want the Microsoft-Activision deal after all

United Kingdom’s Competition and Markets Authority’s initial impression of Microsoft’s proposed Activision merger was negative. This was extended in the watchdog’s provisional findings. With this, the software company saw a glimmer of hope when it partially had a change of heart and dropped one of its main concerns regarding consoles. Unfortunately for Microsoft, it was a false hope as it has now decided to block the deal, citing issues about cloud gaming.

“We’ve prevented Microsoft from purchasing Activision over concerns the deal would damage competition in the Cloud Gaming market, leading to less innovation and choice for UK gamers,” the regulator announced.

The regulator claimed the deal “would alter the future of the fast-growing cloud gaming market,” as it could make Microsoft bigger in the area and ultimately dominate it. It mentioned the company’s resources and current cloud standing, saying it is responsible for up to 70% of the cloud gaming services worldwide.

To recall, Microsoft made agreements with its competitors to bring Activision titles to other console and cloud platforms. However, the regulator defended its side by explaining that the behavioral remedies have “a number of significant shortcomings” in the cloud gaming section. The watchdog said there is also an incentive for the company to make a price hike in its Game Pass plan after adding Activision titles post-deal.

“Accepting Microsoft’s remedy would inevitably require some degree of regulatory oversight by the CMA,” it added. “By contrast, preventing the merger would effectively allow market forces to continue to operate and shape the development of cloud gaming without this regulatory intervention.”

Despite the decision, Microsoft expressed determination to make an appeal. Microsoft President Brad Smith confirmed it, stressing the company’s disappointment over the “flawed understanding” reflected by CMA’s decision. Activision also voiced its intention to reverse the decision, but it might not be an easy path, especially after what happened to Facebook after its acquisition involving Giphy was also blocked by CMA. 

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