The U.K.'s antitrust regulator has announced it will block Microsoft's purchase of Activision Blizzard over concerns the deal would be anticompetitive in the cloud gaming market.
In a press release announcing the block, the Competition and Markets Authority (CMA) said it had prevented Microsoft's proposed purchase of Activision over concerns the deal would lead to "reduced innovation and less choice for U.K. gamers over the years to come."
The CMA carefully considered whether the benefit of having Activision's content available on Game Pass outweighed the harm that the merger would cause to competition in cloud gaming in the U.K. The CMA found that this new payment option, while beneficial to some customers, would not outweigh the overall harm to competition (and, ultimately, U.K. gamers) arising from this merger, particularly given the incentive for Microsoft to increase the cost of a Game Pass subscription post-merger to reflect the addition of Activision's valuable games.
Microsoft entered into a $68.7 billion deal to buy Activision Blizzard, one of the most popular video games publishers in the world, in January 2022. The studio is the maker of hit games such as Call of Duty, Candy Crush, World of Warcraft, and more.
If the purchase for Microsoft had been allowed to go ahead it would have seen several of Activision's games move to Xbox Game Pass, Microsoft's gaming subscription service.
Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors," said Martin Coleman, chair of the independent panel of experts who conducted the investigation.
Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market.
Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job.
Microsoft's acquisition of Activision Blizzard was approved by regulators in several other countries including Brazil, Chile, Japan, Saudi Arabia, Serbia, and South Africa, but the company still needs the approval of the U.K.'s CMA and the European Union to complete the deal.
The EU Commission has until late May to announce its decision. Microsoft has already said that the company will appeal the CMA's decision. If it fails, Microsoft will owe Activision $3 billion in break-up fees.
Separately in the United States, Microsoft is facing additional regulatory blowback from the Federal Trade Commission (FTC), which sued to block Microsoft's Activision Blizzard purchase last year. The investigation is still ongoing.
Microsoft's Xbox Game Pass is available on the iPhone and iPad through Safari, but not the App Store. While Apple does allow all-in-one gaming subscription services to be on the platform, every game offered on the service must be submitted individually for approval through the App Store review process.
