UK regulators have blocked the acquisition of Activision by Microsoft (MSFT) for $69 billion Blizzard (ATVI) on Wednesday, hampering the tech giant's ambitions in the growing European gaming market and delivering a victory for advocates of tougher regulation large technology companies.
Key Points to Remember
- The UK competition watchdog has blocked Microsoft's $69 billion acquisition of Activision Blizzard.
- The Microsoft-Activision deal could have been the biggest consumer technology acquisition since AOL bought Time Warner more than two decades ago.
- The UK's Competition and Markets Authority (CMA) says Microsoft already has 60-70% of the global cloud gaming market, and this deal would stifle innovation.
- The Federal Trade United States Commission (FTC) sued Microsoft over this deal in December.
The decision by the UK's Competition and Markets Authority (CMA) halted what could have been the biggest consumer technology acquisition since AOL bought Time Warner more than two decades ago. Prior to the deal, Microsoft already had a commanding 60-70% share of the global cloud gaming market by owning Xbox, its flagship Windows operating system, and its Azure cloud computing infrastructure.
The UK cloud gaming market is one of the fastest growing in the world, with monthly active users more than tripling between the start of 2021 and the end of 2022. The UK market is expected to be worth £1 billion ($1.25 billion) by 2026, representing 9% of the £11 billion ($13.7 billion) global cloud gaming market.
UK regulators said the acquisition would stifle innovation and lead to less choice for consumers.
'CMA halted Microsoft's proposed purchase of Activision over concerns the deal would change the future of the fast-growing cloud gaming market, driving innovation reduced and less choice for UK players over the coming years, " the regulator said in a statement.
Brad Smith, Vice President of Microsoft and chairman, released a statement saying, “We remain fully committed to this acquisition and will appeal.”
The deal, first announced in January 2022, also encountered regulatory hurdles in the United States. The Federal Trade Commission (FTC), led by Chairwoman Lina Khan, which has made tough acquisitions by big tech companies a cornerstone of its mandate, has filed a lawsuit against Microsoft. in December to thwart the deal. In response, Microsoft attempted to circumvent the FTC by appealing to UK and European authorities, who ultimately sided with the FTC.
The ruling delivers a major win for proponents of Tougher enforcement of antitrust laws and regulation of big tech companies that have become near monopolies in certain industries, a trend that has accelerated in the United States and abroad.
The FTC sued Amazon (AMZN) in February after examining the bundling practices of the e-commerce giant's Prime subscription service and alleged bias against outside sellers on its website. In 2020, the Department of Justice sued Google (GOOG) for violating antitrust law in the search and search advertising market, alleging that its business practices constituted a monopoly.
Microsoft shares rose by more than 7% in early trading on Wednesday, while those at Activision Blizzard fell 11%, erasing their year-to-date gains. Shares of the former are up 23% so far this year.