UK’s CMA blocks Microsoft’s $69 billion Activision deal over cloud gaming solicitude

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UK’s Competition and Markets Authority (CMA) has blocked Microsoft’s Activision acquisition. The move might come as unexpected for the company since the CMA’s recent statement made everyone believe that the regulator was ready to approve the deal.

In an official statement, the CMA told that the decision regarding the acquisition was taken after Microsoft failed to properly address the future concerns regarding the cloud gaming sector. They said that the deal might “reduced innovation and less choice for UK gamers over the years to come.”

As of now, Microsoft has 60-70% of the global cloud gaming services, these include Xbox Cloud through the game pass, Windows cloud services and Azure. Since cloud gaming is recently gaining traction and allows people to play games even without owning a game console, the company may get an advantage over others in the market.

Microsoft has tried to convince CMA with multiple deals in both the cloud gaming sector and console gaming, but CMA has concluded that the behavioral remedies through Microsoft’s 10-year exclusive deals are insufficient.

Given the amount of change that may occur in the industry during a 10-year period, CMA said that there is a likelihood of conflict between Microsoft and other cloud gaming providers and will require regulatory oversight.

Microsoft president Brad Smith, responding to the decision, said, “We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom.”

“We have already signed contracts to make Activision Blizzard’s popular games available on 150 million 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,” he further added.

Both Activision and Microsoft were expecting a totally different decision, especially since the last conclusion from the CMA after a recent investigation. Speaking on the decision, an Activision Blizzard employer said, “The CMA’s report contradicts the ambitions of the U.K. to become an attractive country to build technology businesses.”

Further adding, “We will work aggressively with Microsoft to reverse this on appeal. The report’s conclusions are a disservice to U.K. citizens, who face increasingly dire economic prospects. We will reassess our growth plans for the U.K. Global innovators large and small will take note that – despite all its rhetoric – the U.K. is clearly closed for business.”

While CMA has made clear that the console gaming market will not be affected by the merger, especially due to an equally rival ‘Sony’, cloud gaming is a very different alley as the biggest competitor for Microsoft in cloud gaming, ‘Google’ recently pulled the plug on Stadia, it’s cloud gaming service, leaving the market open for Microsoft.

The European Union is also set to announce its findings next month, and while the initial response was positive, the recent decision from CMA has made everything uncertain for the company, not to mention the Federal Trade Commission’s scheduling order.