UK Competition watchdog blocks Microsoft’s purchase of Activision Blizzard

The UK’s competition watchdog, the Competition and Markets Authority (CMA) has blocked Microsoft’s $68.7 bn acquisition of Activision Blizzard, citing concerns about the impact on the nascent field of cloud gaming.

According to CMA, the acquisition would have given Microsoft undue power to shape the cloud gaming industry. Microsoft holds an estimated 60-70% share of global cloud gaming services. Additionally, Microsoft has significant strengths in cloud gaming, owning the leading PC operating system (Windows), Xbox, and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming). With this deal, it would acquire important gaming content such as Call of Duty, Overwatch, and World of Warcraft, thus further solidifying its position in the market.

The Guardian reported that the decision is unusual as vertical mergers (between companies that are at different stages in the production process) are generally considered safer than horizontal ones (companies that sell similar products merge, as in this case).

For Microsoft to be able to finalise the acquisition of Activision Blizzard, regulatory bodies in the UK, the US, and the EU needed to give their approval. Currently, US and EU regulators have not yet decided whether or not they will approve the agreement. Meanwhile, both Microsoft and Activision intend to appeal the CMA’s decision. Activision Blizzard and Microsoft have further warned that the decision will discourage technology innovation and investment in the UK.