Microsoft fails to get CMA thumbs-up on Activision deal

Microsoft’s $68.7m acquisition of Activision Blizzard is in jeopardy after the UK’s Competition and Markets Authority (CMA) objected to the purchase.

The acquisition was seen by many as Microsoft’s attempt to establish a viable business proposition in the metaverse. The setback in the UK leaves questions over whether the deal can go through, and if other regulators decide in favour of the acquisition, how Microsoft’s 40-year-old business in the UK will fare.

The decision to prevent the deal follows an extensive inquiry into the acquisition, which raised concerns over the dominance of Microsoft in the emerging cloud gaming market. The CMA said Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector, outlined in its provisional findings published in February.

Martin Coleman, chair of the independent panel of experts conducting the investigation, said: “Gaming is the UK’s largest entertainment sector. 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 it is vital that we protect competition in this emerging and exciting market.”

Speaking to the BBC, CMA CEO Sarah Cardell said: “I think this decision shows how important it is to support competition in the UK. The UK is absolutely open for business. We want to create an environment where a whole host of different companies can compete effectively, can grow and innovate.”

She described the CMA’s decision as “the best thing for UK consumers and the best thing for UK businesses”.

Tweeting about the CMA’s decision, Microsoft president Brad Smith wrote: “We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom.”

“This decision shows how important it is to support competition in the UK. We want to create an environment where a whole host of different companies can compete effectively, can grow and innovate”

In an interview with the BBC, Smith was asked about other regulators, such as the US Federal Trade Commission (FTC) and the European Union Anti Competition Authority, both of which are looking at the deal.

Smith said: “The FTC and the US raised issues and we’ve been working to address them, but in the meantime, governments around the world have approved this deal, and what is most striking to me is that the English Channel has never seemed wider.”

He described Brussels as “a place where one can sit down and actually have a conversation with the regulators who are accountable to the elected leaders”. Smith referred to the UK regulators as “not only unelected, but unaccountable”.

He went on to describe the CMA’s decision as “fundamentally unwise” and urged the UK government to look at the role of the CMA, which, in his opinion, has damaged the UK’s reputation as a place to invest in technology innovation.

“I have already heard from a great many around the world. People are shocked. People are disappointed. And people’s confidence in technology in the United Kingdom has been severely shaken,” he told the BBC.

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