Game Over? CMA block of Activision deal to set the tone for other regulators

The UK competition regulator today blocked Microsoft’s $70bn bid for the video game publisher, Activision Blizzard, citing concerns over competition in a fledgling cloud market.

The move by the Competition and Markets Authority (CMA) to scupper the deal — Microsoft’s largest acquisition — comes as a blow to the tech giant, which has already announced it will appeal the decision. 

“It’s daring, it’s assertive, and they will now have to face review by the CAT (Competition Appeal Tribunal). That will be the next interesting step,” said Anne Witt, a law professor and member of the EDHEC Augmented Law Institute.

Activision said it would assist Microsoft in the appeal. 

“We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business,” the company said in a statement 

Its share price fell over 10 per cent in pre-market trading.

The deal is also being probed by other regulators, the European Commission and the US Federal Trade Commission, but moves by the UK regulator and appeals court are now likely to weigh on their decisions, experts said. 

“If Microsoft succeeds, the game goes on,” added Witt. “It needs to clear the EU and US hurdle. But if the CAT conforms to the CMA’s decision, then it’s truly game over.”

Microsoft had previously pledged a string of proposals, enough to encourage the regulator to set aside its concerns that competition would be stifled in the console market last month. But the regulator still had concerns that it would be “commercially beneficial” to Microsoft to lock the games into its own cloud gaming service should the deal go ahead.

“What I’m picking up on is that the CMA seems to think Microsoft didn’t cover all of its bases when striking deals with cloud gaming services,” said Joost Rietveld, an associate professor at University College London’s school of management. 

“They seem to acknowledge cloud gaming is dynamic but they seem convinced it will grow a lot in the future and Microsoft is already well positioned to dominate the space,” he added.

The CMA also cited concerns that should the deal be halted, Activision could provide games through cloud platforms in the future. 

“I think it’s really interesting that their decision is a view to having many more players in the market,” said Richard Stebbing, an IP associate at Withers law firm, who told City A.M. earlier in the day that he expected the merger would go ahead.

He added that should the ruling stick, gamers will have more choice, keeping prices of games lower. 

The decision also means gaming companies would have to “carefully consider their 5-10 year plans,” said Rachel Burford, a partner at the law firm Charles Russell Speechlys.

The block is also a signal that the UK regulator is being more heavy handed with big tech. Meta’s attempt to acquire the gif hub, Giphy, were also blocked by the CMA in November 2021.

For now, Microsoft said it will appeal the decision while the FTC and European Commission rally their responses. The European Commission has said it will hand over a verdict by May. 

Rietveld said the move would give the FTC more “breathing space.”

“It’s not clear what they will do but they will benefit in the sense that it gives them more time,” he added. “The story isn’t over.”