UK Regulators Block Microsoft’s Acquisition of Activision Blizzard

Microsoft’s proposed $69 billion acquisition of Activision Blizzard was dealt a possible death blow this week when the U.K. antitrust regulator blocked the move.

In a Wednesday statement, the Competition and Markets Authority (CMA) said its action was taken over concerns the megadeal would result in “reduced innovation and less choice for U.K. gamers over the years to come.”

The regulator noted that Microsoft would emerge from the acquisition with an “even stronger” position in cloud gaming.

That would be on top of its present market share of 60-70% globally. The company sells the immensely popular Xbox gaming console and dominates cloud-based video gaming with its Xbox Game Pass subscription.

Concerns were also voiced that popular Activision titles could be made exclusive to Microsoft platforms and their prices increased.

It would have marked the biggest ever deal in the gaming industry and one of the 30 largest acquisitions of all time. However, even with Microsoft’s numerous proposed remedies to offset its powerful new position if the deal went through, it was not enough to appease regulators.

The company on Tuesday issued a positive earnings report and steady guidance, both of which sent its stock higher.

The decision from the powerful CMA potentially derailed the company’s momentum. It still awaits decisions from the European Union and the U.S. Federal Trade Commission.

Acquiring Activision Blizzard would give Microsoft control of some of the most powerful titles in the gaming industry. Franchises such as “Call of Duty,” “World of Warcraft,” “Diablo” and “Overwatch” would fall into its control.

But in December the U.S. Federal Trade Commission sued to prevent the acquisition over the same competitive issues voiced by U.K. regulators. There is a hearing scheduled for August on the deal, and the E.U. is also warily studying the proposal.

Both companies announced they will appeal the U.K. decision.

Activision Blizzard CEO Bobby Kotick released a statement saying the ruling will be contested, “and we’ve already begun the work to appeal to the U.K. Competition Appeals Tribunal.”

Brad Smith, President of Microsoft, chimed in that regulators appear to have a “flawed understanding” of the video gaming market as well as the workings of “relevant cloud technology.”