Global Courant 2023-04-27 00:16:25
UK antitrust regulators on Wednesday blocked Microsoft’s $69 billion purchase of video game maker Activision Blizzard, thwarting the largest technology deal in history amid concerns it would stifle competition for popular titles like Call of Duty in the burgeoning cloud gaming market.
The Competition and Markets Authority said in its final report that “the only effective remedy” against the substantial loss of competition “is to prohibit the Merger”. The companies have agreed to appeal.
The all-cash deal announced 15 months ago has met fierce opposition from rival Sony, which makes the PlayStation gaming system, and has also been scrutinized by regulators in the United States and Europe over fears it could threaten Microsoft and its Xbox console control over hit franchises like Call of Duty and World of Warcraft.
The UK watchdog’s decision “came as a surprise to most people” and adds to global uncertainty about the deal, said Liam Deane, a games industry analyst for research firm Omdia.
“The market is big enough to throw quite a bit of a spanner in the works from the perspective of Microsoft and Activision, but it will be much worse if they also get the wrong decision from the European Commission in a few weeks,” he said.
The UK watchdog’s concerns centered on how the deal would affect cloud gaming, which streams to tablets, phones and other devices and frees players from buying expensive consoles and game consoles. Gamers can continue to play major Activision titles, including mobile games like Candy Crush, on the platforms they usually use.
Cloud gaming has the potential to change the industry by giving people more choice about how and where they play, said Martin Colman, chair of the Competition and Markets Authority’s independent expert panel examining the deal.
“This means it is vital that we protect competition in this emerging and exciting market,” he said.
The decision underlined Europe’s reputation as a global leader in efforts to curb the power of Big Tech companies. The day before, the UK government unveiled a bill that would give regulators more power to protect consumers from online scams and fake reviews and boost digital competition.
The UK decision further dashed Microsoft’s hopes that a favorable outcome could help resolve a lawsuit brought by the US Federal Trade Commission. A trial in the FTC’s internal court begins on August 2. The decision of the European Union is due on 22 May.
UK ‘closed for business’
Activision lashed out, portraying the watchdog’s decision as a bad signal to international investors in the UK at a time when the UK economy was facing major challenges.
The California-based game maker said it would “work aggressively” with Microsoft to appeal, claiming the move “goes against the UK’s aspirations” to be an attractive place for tech companies.
“We will reassess our UK growth plans. Global innovators big and small will take note that – for all its rhetoric – the UK is clearly closed for business,” said Activision.
Redmond, Washington-based Microsoft also indicated it was not ready to give up.
“We remain fully committed to this acquisition and will appeal,” President Brad Smith said in a statement. The decision “rejects a pragmatic path to address competition concerns” and discourages technology innovation and investment in the UK, he said.
“We are particularly disappointed that, after much deliberation, this decision seems to reflect a lack of understanding of this market and how the relevant cloud technology works,” said Smith.
Activision CEO Bobby Kotick said in a blog post that both companies have started an appeal process with the UK’s Competition Appeal Tribunal.
It wasn’t the first time UK regulators flexed their antitrust muscles on a Big Tech deal. They previously blocked Facebook parent Meta’s purchase of Giphy for fear it would limit innovation and competition. The social media giant appealed the decision to the tribunal, but lost and was forced to sell its GIF-sharing platform.
Microsoft already has a strong foothold in the overall cloud computing market, and regulators concluded that if the deal goes through, it would bolster the company’s advantage by giving it control of key gaming titles.
In an effort to ease the concerns, Microsoft made deals with Nintendo and some cloud gaming providers to license Activision titles like Call of Duty for 10 years – and offered the same to Sony.
Sony’s European press service did not respond to a request for comment.
The watchdog said it had looked “in depth” at Microsoft’s remedies, but felt they needed oversight, while preventing the merger would allow cloud gaming to develop without interference.
Cloud gaming is a small part of the UK’s five billion pound ($6.2 billion) video game market. But an expert forecast suggested it would explode in the coming years, with its user base tripling from early 2021 to late 2022 and the cloud gaming market expected to grow to a billion pound ($1.2 billion) value. in 2026, regulators said.
They dropped concerns last month that the deal would hurt console gaming, saying it wouldn’t benefit Microsoft to make Call of Duty exclusive to its Xbox console.
