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Trouble for Microsoft: UK blocks Activision Blizzard takeover

26/4/2023

Translation: machine translated

British regulators block Microsoft's takeover of the Activision Blizzard video games group. The reasons for this are surprising.

Microsoft is facing major problems. The 68.7 billion dollar acquisition of Activision Blizzard has been blocked by the UK Competition and Markets Authority (CMA).

The competition authority fears that the software and video games giant from Redmond could gain unfair advantages in the cloud gaming market with the takeover. This reasoning is surprising - especially because cloud gaming has played a subordinate role in previous investigations.

Does the planned takeover threaten to collapse?
Source: Microsoft

As recently as March, the British authority sided with Microsoft. In a notice on 24 March, the CMA stated that the takeover would not have any negative impact on competition in the console sector. This is partly because Microsoft has offered both Sony and Nintendo long-term deals for the publication of "Call of Duty" on their platforms - although only the latter accepted the deal.

Only the impact on the cloud gaming business was still a concern for the authority in March. In order to appease the CMA, Microsoft then signed deals with cloud suppliers Boosteroid, Ubitus and Nvidia https://www.theverge.com/2023/3/15/23641071/microsoft-ubitus-call-of-duty-xbox-pc-games-deal-activision-blizzard-acquisition. The agreements are for ten years and secure the cloud services access to various Activision franchises and "Call of Duty".

The billion-dollar franchise «Call of Duty» is the main focus of the investigations.
Source: Activision Blizzard

The CMA has investigated these deals and found "significant shortcomings". Among other things, because the agreements are only limited to certain Activision games and Microsoft is not open to suppliers who provide their services outside the Windows world. According to the authority, the acquisition "could permanently change the future of the fast-growing cloud gaming market and mean less innovation and choice for gamers in the UK".

Microsoft intends to appeal the decision. President Brad Smith commented on the judgement on Twitter. The CMA's decision reflects a "flawed understanding of the video games market". Microsoft is still endeavouring to push through the takeover and bring Activision-Blizzard games "to over 150 million devices".

The turbulent history of the acquisition

In addition to the UK, the takeover also faces a major obstacle in the USA. The Federal Trade Commission (FTC) sued Microsoft in December last year to stop the acquisition. In a media release, the FTC argues that the deal will have a negative impact on free competition in the console market.

Since the takeover was announced in January 2022, the deal has been scrutinised by various competition authorities around the world. Regulators in Brazil, Chile, Japan, Saudi Arabia, Serbia and South Africa have already waved the acquisition through. According to Reuters, the takeover will most likely also be approved in the EU on 22 May.

Originally, Microsoft wanted to finalise the acquisition by the end of July. An objection will significantly delay these plans. If Microsoft does not manage to finalise the takeover within the originally planned timeframe, the Redmond-based company will have to pay Activision Blizzard three billion dollars in compensation.

Sony as the biggest opponent of the deal

Sony is considered the biggest opponent of the Activision Blizzard takeover. The video game giant fears that Microsoft will make major franchises such as "Call of Duty" Xbox-exclusive in the future.

Sony has rejected a ten-year deal for the release of "Call of Duty" on Playstation platforms. According to Sony, Microsoft could deliberately release inferior versions of the games on its console in order to sabotage the Playstation brand.

Sony has not yet commented on the latest events.

Cover photo: Activision Blizzard

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