UK regulator CMA blocks Microsoft's $69 billion acquisition of Activision Blizzard over concerns in the cloud market

Back in January 2022, Microsoft announced its $69 billion acquisition deal of Activision Blizzard. However, today the UK regulatory body known as the Competition and Markets Authority (CMA) has announced that it is blocking the deal over concerns in the cloud market. The CMA raised concerns earlier in the year that the deal could harm competition in the gaming industry, which has been under regulatory scrutiny over the past year. The UK is the first major regulator to block the deal, while other countries, including Brazil, Chile, Japan, Serbia, and Saudi Arabia, have approved the deal.

CMA on Twitter

Microsoft has been working to sign deals for competing cloud platforms to gain access to Call of Duty and other games, including NVIDIA's GeForce Now, which will no longer get access to Call of Duty as a result of this ruling. However, the CMA wasn't convinced and has blocked the deal, claiming that it could harm the cloud gaming market. The controversial decision aims to protect the so-called "cloud gaming" market, but many are of the opinion that the CMA's actions instead appear to be aimed at protecting PlayStation's leadership, while harming the potential growth of cloud gaming services.

Microsoft still needs approval from the European Commission and the State Administration for Market Regulation (SAMR) in China before the purchase can officially be consummated. The appeals process for CMA regulatory rulings is difficult to overcome, and tech companies like Facebook have simply walked away from acquisition attempts after the CMA ruled to block in the past. However, Microsoft President Brad Smith has signaled intent to appeal the UK CMA's decision, setting the stage for a large, expensive, and laborious court battle. Some have suggested that this process could stretch until mid-2024, and still then be quite difficult to emerge victorious, so the chances of the deal being completed are very low.

Brad Smith on Twitter

Activision plans to re-assess its investment into the UK, stating that the country is "closed for business." Activision CEO Bobby Kotick also plans to appeal the decision from the UK regulator according to recent statement. For now, the ball is in the European Commission's court, the next significant organization for this agreement whose date to announce its final decision has been pushed back to May 22.

Our take: Despite Microsoft and Activision's efforts to appeal the decision made by the CMA, the outlook for the deal seems bleak now, especially given the clear opposition to the acquisition expressed by the FTC. Regardless of whether the deal would have gone through or not, this event was destined to be a turning point in the dynamics of the video game industry. It's pretty clear that we will see more aggressive movements from the market leader, Sony, as well as major external players such as Google, Amazon, and Tencent. The future of gaming is poised to be more competitive than ever before, with the outcome of this acquisition serving as a sign of what is to come.