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British regulators on Wednesday blocked Microsoft’s US$69 billion purchase of video game maker Activision Blizzard, disrupting the biggest tech deal in history over concerns it would stifle competition in the fast-growing cloud gaming market.
The Competition and Market Authority said in its final report that “the only effective remedy” for the substantial loss of competition “is to prohibit mergers.” The company has vowed to appeal.
The all-cash deal faces stiff opposition from rival Sony and is also being scrutinized by regulators in the US and Europe over fears it would give Microsoft control over popular game franchises like Call of duty, World of Warcraft and Candy Crush.
The UK watchdog’s concerns centered on how the deal would affect competition in cloud gaming, which includes streaming games to tablets, phones and other devices. That frees players from having to buy expensive consoles and gaming computers.
Cloud gaming has the potential to change the industry by giving people more choice about how and where they play, said Martin Colman, chairman of the Competition and Markets Authority’s independent expert panel investigating the deal.
“This means it is important to protect competition in this growing and exciting market,” he said.
Microsoft says it will try to finalize a deal
Microsoft said it was disappointed and signaled it was not ready to give up.
“We remain committed to this acquisition and will appeal,” president Brad Smith said in a statement. He said the regulator’s decision “rejects a pragmatic path to tackling competition issues” and discourages innovation and technology investment in the UK.
“We are deeply disappointed that after a long deliberation, this decision appears to reflect a misunderstanding of this market and the way cloud technology fits,” said Smith.
Activision also fired back, saying it would “work aggressively with Microsoft to reverse this on appeal.”
Regulators had dismissed concerns last month that the deal would harm console gaming, saying it would not benefit Microsoft. Call from duty exclusive to its Xbox console.
The watchdog said on Wednesday that it had examined Microsoft’s proposals to address competition concerns “in great depth” but found the solution required oversight, while preventing mergers would allow cloud gaming to flourish without intervention.
Microsoft already has a strong position in the cloud computing market and regulators concluded that if the deal went through, it would strengthen the company’s advantage by giving it control of major gaming titles.
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