UK watchdog blocks Microsoft's Activision Blizzard acquisition
(2023/04/26)
- Reference: 1682513237
- News link: https://www.theregister.co.uk/2023/04/26/uk_regulators_block_microsofts_activision/
- Source link:
UK regulators have dealt a serious blow to Microsoft's hopes of acquiring gaming giant Activision Blizzard, with the Competition and Markets Authority blocking the massive deal because Microsoft's proposed remedies "had significant shortcomings."
The $68.7 billion purchase would be the largest in the gaming industry's history if it ever goes through, but if the CMA's final decision ends up standing it won't happen at all.
According to the CMA, Microsoft's responses to the regulator's [1]preliminary findings delivered in February "failed to effectively address the concerns in the cloud gaming sector," which the CMA [2]said "could make Microsoft even stronger in cloud gaming, stifling competition in this growing market."
[3]
Microsoft is already in control of some 60 percent to 70 percent of the cloud gaming market, which the CMA described as still in its nascent stage. If Microsoft is allowed to consume Activision Blizzard, the combined company would have "such a strong position in the cloud gaming market just as it begins to grow rapidly [and] would risk undermining the innovation that is crucial to the development of these opportunities," the CMA said.
… and we don't want to play global video game cop
Microsoft proposed a series of behavioral remedies that would include licensing the popular Call of Duty franchise for use on other cloud gaming platforms and consoles, like Sony's Playstation, which the Japanese gaming company roundly [4]rejected as doing nothing to help ensure fair competition.
The CMA isn't keen on Microsoft's remedy proposal, either, and characterized it as "replacing market forces in a growing and dynamic market with mandated regulatory obligations ultimately overseen, and enforced by, the CMA – in this case at a global level."
[5]
[6]
The authority said that Microsoft's proposals didn't cover different cloud gaming business models (like multigame subscription services) and did nothing for providers who would want to port games to non-Windows operating systems. It would also standardize terms and conditions for games, which the CMA said wouldn't be the case in the absence of the merger.
"The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future," the CMA said.
[7]
The CMA also said it had no reason to believe Microsoft wouldn't act to restrict Activision games to its own service given the chance. "Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision's games exclusive to its own cloud gaming service," the Authority said in its decision.
"Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market," said Martin Coleman, chair of an independent panel of experts conducting the CMA merger investigation.
Game over. Continue?
In a [8]tweet this morning, Microsoft vice chair and president [9]Brad Smith said Microsoft was committed to continuing its fight to acquire Activision Blizzard and that it would appeal the CMA decision.
"The CMA's decision rejects a pragmatic path to address competition concerns," Smith said. "We're especially disappointed that after lengthy deliberations, the decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works," the Microsoft leader added.
Activision [10]said much the same, adding that: "The CMA's report contradicts the ambitions of the UK to become an [11]attractive country to build technology businesses," and that it would be joining Microsoft to appeal the decision.
[12]Microsoft's Mr Smith goes to Europe in quest to win Activision deal
[13]UK becomes Unicorn Kingdom, where AI fairy dust earns King's ransom
[14]Germany sours on Microsoft again, launches antitrust review
[15]Qualcomm tries to kick holes in logic behind €242M fine
[16]Europe moves to derail Broadcom's VMware takeover
EU regulators are [17]expected to approve the deal, but the US Federal Trade Commission has also objected to the merger in a [18]case that's spilled into court. The FTC's arguments are largely the same as the CMA's – that the merger would stifle competition in the subscription and cloud gaming industries.
An evidentiary hearing is scheduled for this August in the FTC-Microsoft case, though if Microsoft's UK appeals are unsuccessful it may not matter. ®
Get our [19]Tech Resources
[1] https://www.theregister.com/2023/02/08/microsoft_activision_uk_cma/
[2] https://www.gov.uk/government/news/microsoft-activision-deal-prevented-to-protect-innovation-and-choice-in-cloud-gaming
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZElKoqFeXhCobLZubbsD@QAAAII&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://www.theregister.com/2023/03/09/sony_microsoft_activision/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZElKoqFeXhCobLZubbsD@QAAAII&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZElKoqFeXhCobLZubbsD@QAAAII&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZElKoqFeXhCobLZubbsD@QAAAII&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://twitter.com/BradSmi/status/1651182266406584320
[9] https://www.theregister.com/2023/02/26/microsoft_nvidia_nintendo_activision/
[10] https://www.bloomberg.com/news/articles/2023-04-26/microsoft-s-69-billion-activision-deal-blocked-by-uk-watchdog
[11] https://www.theregister.com/2023/04/25/uk_becomes_unicorn_kingdom/
[12] https://www.theregister.com/2023/02/26/microsoft_nvidia_nintendo_activision/
[13] https://www.theregister.com/2023/04/25/uk_becomes_unicorn_kingdom/
[14] https://www.theregister.com/2023/03/29/microsoft_german_antitrust/
[15] https://www.theregister.com/2023/03/14/qualcom_eu_fine_appeal/
[16] https://www.theregister.com/2023/04/13/ec_objections_broadcom_vmware/
[17] https://www.theregister.com/2023/03/06/microsoft_activision_eu/
[18] https://www.theregister.com/2023/01/03/microsoft_ftc_activision_court/
[19] https://whitepapers.theregister.com/
The $68.7 billion purchase would be the largest in the gaming industry's history if it ever goes through, but if the CMA's final decision ends up standing it won't happen at all.
According to the CMA, Microsoft's responses to the regulator's [1]preliminary findings delivered in February "failed to effectively address the concerns in the cloud gaming sector," which the CMA [2]said "could make Microsoft even stronger in cloud gaming, stifling competition in this growing market."
[3]
Microsoft is already in control of some 60 percent to 70 percent of the cloud gaming market, which the CMA described as still in its nascent stage. If Microsoft is allowed to consume Activision Blizzard, the combined company would have "such a strong position in the cloud gaming market just as it begins to grow rapidly [and] would risk undermining the innovation that is crucial to the development of these opportunities," the CMA said.
… and we don't want to play global video game cop
Microsoft proposed a series of behavioral remedies that would include licensing the popular Call of Duty franchise for use on other cloud gaming platforms and consoles, like Sony's Playstation, which the Japanese gaming company roundly [4]rejected as doing nothing to help ensure fair competition.
The CMA isn't keen on Microsoft's remedy proposal, either, and characterized it as "replacing market forces in a growing and dynamic market with mandated regulatory obligations ultimately overseen, and enforced by, the CMA – in this case at a global level."
[5]
[6]
The authority said that Microsoft's proposals didn't cover different cloud gaming business models (like multigame subscription services) and did nothing for providers who would want to port games to non-Windows operating systems. It would also standardize terms and conditions for games, which the CMA said wouldn't be the case in the absence of the merger.
"The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future," the CMA said.
[7]
The CMA also said it had no reason to believe Microsoft wouldn't act to restrict Activision games to its own service given the chance. "Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision's games exclusive to its own cloud gaming service," the Authority said in its decision.
"Microsoft engaged constructively with us to try to address these issues and we are grateful for that, but their proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market," said Martin Coleman, chair of an independent panel of experts conducting the CMA merger investigation.
Game over. Continue?
In a [8]tweet this morning, Microsoft vice chair and president [9]Brad Smith said Microsoft was committed to continuing its fight to acquire Activision Blizzard and that it would appeal the CMA decision.
"The CMA's decision rejects a pragmatic path to address competition concerns," Smith said. "We're especially disappointed that after lengthy deliberations, the decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works," the Microsoft leader added.
Activision [10]said much the same, adding that: "The CMA's report contradicts the ambitions of the UK to become an [11]attractive country to build technology businesses," and that it would be joining Microsoft to appeal the decision.
[12]Microsoft's Mr Smith goes to Europe in quest to win Activision deal
[13]UK becomes Unicorn Kingdom, where AI fairy dust earns King's ransom
[14]Germany sours on Microsoft again, launches antitrust review
[15]Qualcomm tries to kick holes in logic behind €242M fine
[16]Europe moves to derail Broadcom's VMware takeover
EU regulators are [17]expected to approve the deal, but the US Federal Trade Commission has also objected to the merger in a [18]case that's spilled into court. The FTC's arguments are largely the same as the CMA's – that the merger would stifle competition in the subscription and cloud gaming industries.
An evidentiary hearing is scheduled for this August in the FTC-Microsoft case, though if Microsoft's UK appeals are unsuccessful it may not matter. ®
Get our [19]Tech Resources
[1] https://www.theregister.com/2023/02/08/microsoft_activision_uk_cma/
[2] https://www.gov.uk/government/news/microsoft-activision-deal-prevented-to-protect-innovation-and-choice-in-cloud-gaming
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZElKoqFeXhCobLZubbsD@QAAAII&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://www.theregister.com/2023/03/09/sony_microsoft_activision/
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZElKoqFeXhCobLZubbsD@QAAAII&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZElKoqFeXhCobLZubbsD@QAAAII&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/personaltech&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZElKoqFeXhCobLZubbsD@QAAAII&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[8] https://twitter.com/BradSmi/status/1651182266406584320
[9] https://www.theregister.com/2023/02/26/microsoft_nvidia_nintendo_activision/
[10] https://www.bloomberg.com/news/articles/2023-04-26/microsoft-s-69-billion-activision-deal-blocked-by-uk-watchdog
[11] https://www.theregister.com/2023/04/25/uk_becomes_unicorn_kingdom/
[12] https://www.theregister.com/2023/02/26/microsoft_nvidia_nintendo_activision/
[13] https://www.theregister.com/2023/04/25/uk_becomes_unicorn_kingdom/
[14] https://www.theregister.com/2023/03/29/microsoft_german_antitrust/
[15] https://www.theregister.com/2023/03/14/qualcom_eu_fine_appeal/
[16] https://www.theregister.com/2023/04/13/ec_objections_broadcom_vmware/
[17] https://www.theregister.com/2023/03/06/microsoft_activision_eu/
[18] https://www.theregister.com/2023/01/03/microsoft_ftc_activision_court/
[19] https://whitepapers.theregister.com/
Re: Disagree
Phones Sheridan
UK bans an American company from acquiring another American company. Yes I can see this being effective. Unless the 2 entities have a uk office, there’s not a jot the CMA can do about it except moan.
Re: Disagree
navarac
I think it is more than just Consoles and games on those consoles. The future of gaming is in the cloud, and Microsoft has an advantage in the Cloud - it is now a Cloud business. It sees an advantage to be had over all others in the Cloud. I hope this decision clips its wings, at least for a while. Lotta bottle to the UK CMA.
I wish more takeovers were blocked
alain williams
to encourage a diverse market. The CMA needs to help make a market with many competing suppliers - that is what is good for consumers.
Slx
It will be interesting to see if this decision has any impact at all, or if it just means that the deal will go ahead and the UK will be side stepped entirely.
I can understand the EU or US competition authorities being big enough to have somewhat global reach in their decisions, but the UK is a mid-sized single country. and is really stretching its regulatory reach in this.
It'll be interesting to see where this goes...
"the decision appears to reflect a flawed understanding of this market"
Pascal Monett
AKA : they don't get it the way we do.
Yeah, well I'm not disappointed in the least. The only cloud service I trust in gaming is Steam, and nobody else, neither Borkzilla nor Activision, is up to Steam's level in the matter.
Disagree
I personally disagree with this decision since Sony also has exclusive deals with ISV's to only release certain game titles for their platforms. Either the U.K. should prohibit Sony from doing so or allow Microsoft to takeover Activision and allow these deals.