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Play by the rules: Microsoft’s purchase of Activision Blizzard blocked by regulators

Microsoft’s proposed USD 69 bn acquisition of video game publisher Activision Blizzard has been blocked by the U.K. Competition and Markets Authority (CMA) due to concerns that it would harm competition in the fast-growing cloud gaming market. The regulator said that Microsoft’s proposal to offer access to Activision’s popular “Call of Duty” franchise to leading cloud gaming platforms would not effectively address its concerns.

Microsoft has stated that it will appeal the decision, and Activision has pledged to work with the company to reverse it. However, Activision’s shares fell 10 percent in pre-market trading after the announcement. The CMA’s decision is an unexpected blow to what would have been the largest-ever deal in gaming.

Microsoft announced its proposed acquisition of Activision Blizzard in January 2022 to boost its position in a video gaming market led by Tencent and Sony. The deal had already cleared regulatory hurdles in the U.S. and China but faced challenges in Europe and the U.K..

The CMA said that cloud gaming is forecast to be worth USD 13.7 bn globally by 2026 and that competition in this market needs to be protected. It added that Microsoft already has a significant advantage in the cloud gaming services sector, estimating that it has 60-70 percent of the global market.

The CMA’s decision is the latest sign that U.K. regulators are willing to take on Big Tech. In 2022, the watchdog blocked Facebook-owner Meta’s acquisition of Giphy. Europe will decide on the Activision deal by May 22, and the U.S. Federal Trade Commission is also seeking to block it.

Microsoft’s president, Brad Smith, said in a statement that the company remained fully committed to the acquisition and would appeal the decision. Activision’s CEO, Bobby Kotick, told staff that it was not “the news we wanted, but it is far from the final word on this deal”. He added that the company would reassess its growth plans for the United Kingdom.

The CMA’s decision has had an immediate impact on Activision’s market value, with shares falling 10 percent in pre-market trading. If these losses hold, the video-game publisher will erase nearly USD 7 bn in market valuation. The decision is a major blow to Microsoft’s ambitions in the gaming sector and could lead to further regulatory scrutiny of the company’s activities in this market.

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