The Call of Duty developer Activision Blizzard has accused the UK of being “closed for business” after the competition regulator blocked its attempted takeover by Microsoft, which would have been the largest acquisition in gaming history.
The Competition and Markets Authority (CMA) prevented the $68.7bn (£55bn) cash purchase because of concerns it would squash the cloud gaming market, sparking furious pushback from both sides of the deal. Microsoft said it would “discourage technology innovation and investment in the UK”, while Activision Blizzard vowed to “reassess our growth plans for the UK”.
The tie-up would have created a gaming behemoth, merging Activision’s plethora of “AAA” titles, which also include World of Warcraft, Hearthstone, Candy Crush Saga and Overwatch, with Microsoft’s burgeoning stable of first-party developers, its Xbox consoles and its control of PC gaming.
The block follows the CMA’s decision in October last year to prevent Meta acquiring the animated gif search engine Giphy.
Anne Witt, a law professor and member of the EDHEC Augmented Law Institute, described the Activision decision as “huge news”.
She said: “The CMA is the only competition agency globally to have ever prohibited a big-tech merger, and now they’ve done it twice. While the UK is a little behind in terms of platform regulation, the CMA is really taking a leadership role in big-tech merger control.”
The regulator’s decision on Activision Blizzard had seemed to be tilting in Microsoft’s favour after it announced earlier this month that it was content with the Seattle-based company’s promises to make Call of Duty available on other platforms for at least a decade. Those promises, it said, preserved competition in the home console market, against protests from the PlayStation owner Sony.
But the CMA eventually concluded that the burgeoning field of cloud gaming, which lets users stream video games to play on their phones or TVs without investing in specialised hardware, was more likely to be warped if the purchase were allowed.
Microsoft offers a subscription service, Xbox Cloud Gaming, which allows access to many of its first-party titles for a single monthly fee, and it would have been likely to include Call of Duty in the bundle.
Martin Coleman, the 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 that it is vital that we protect competition in this emerging and exciting market.
“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.”
The regulator concluded that Microsoft’s proposed remedies were insufficient to allow the merger to go ahead, because they failed to “sufficiently cover” other cloud-gaming business models. It also said they focused too heavily on protecting console competition but not PC gamers who used operating systems other than Windows, such as Mac and Linux.
Activision and Microsoft have the opportunity to appeal to the Competition Appeal Tribunal. If they do, the body is expected to issue a final decision before the end of the year.
An Activision Blizzard spokesperson said: “The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses. We will work aggressively with Microsoft to reverse this on appeal.
“The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”
Microsoft said it would appeal. Brad Smith, its vice-chair and president, said: “The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the UK.
“We have already signed contracts to make Activision Blizzard’s popular games available on 150m more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”
In a note to employees published on Substack, Activision Blizzard’s chief executive, Bobby Kotick, said: “This isn’t the news we wanted, but it is far from the final word on this deal.”
