The UK’s competition regulator has blocked Microsoft Corp's US$75bn acquisition of the Call of Duty maker Activision Blizzard Inc (NASDAQ:ATVI) to protect innovation in the cloud gaming market, which could deal a fatal blow to the software group’s hopes of securing its biggest ever deal.
The Competition and Markets Authority said it believed the company would be commercially motivated to make Activision’s games exclusive to its own cloud gaming service, adding that Microsoft had failed to address its concerns.
“We have concluded that the merger would result in the most powerful operator in the fast-developing market for cloud gaming, with a current market share of 60-70%, acquiring a portfolio of world-leading games with the incentive to withhold those games from competitors and substantially weaken competition in this important growing market,” the CMA said.
Microsoft said it would appeal the ruling. “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,” Brad Smith, Microsoft president, said in a statement.
The CMA found that the deal would not hit competition in the console gaming services market in the UK but would restrict competition in cloud gaming services.
The regulator said a proposed remedy by Microsoft fell short in several areas.
In particular, the scope of the remedy was limited to cloud gaming providers with specific business models.
The CMA concluded it has “decided to prohibit the merger.”