The UK antitrust has blocked the acquisition of Activision Blizzard and 69 billion dollars from Microsoft, in a potentially fatal blow to the largest operation in the video game industry. Activision shares fell 9% to $78 a share during the New York session. Microsoft, on the other hand, which reported better-than-expected financial results on Tuesday, climbed 7.4% a $294 for action. If the deal were to be blocked, Microsoft could be in difficulty paying a break up fee equal to $3 billion. The Redmond giant has already announced that it will appeal the decision.
The motivation of the UK Antitrust
The competition and markets regulator said its concerns could not be resolved with remedies such as the sale of the blockbuster game Call of Duty or other solutions that include a promise to allow rivals to offer the game on their platforms .
The pressure on Microsoft had increased as it exerted pressure in the US and Europe to convince the competent authorities to conclude the agreement. The acquisition would be one of the 30 largest of all time. The findings from the Competition and Markets Authority (CMA) come ahead of decisions from the European Union and the US Federal Trade Commission, which is awaiting a hearing in the summer after formally suing to veto the transaction.
“Microsoft already enjoys a strong and leading position over other competitors in cloud gaming, and this deal would strengthen that lead by giving it the ability to undermine new and innovative competitors,” he said. Martin Colemanchair of the independent expert group conducting this investigation.
The CMA thought the merger could lead to higher prices, fewer choices and less innovation for UK players. The CMA said the deal would solidify Microsoft’s lead in the market by giving it control over titles like Call of Duty, Overwatch and World of Warcraft. The antitrust found that without the merger, Activision would have been able to start delivering games on cloud platforms.
The latest volume of “Call of Duty: Modern Warfare II” launched in October has surpassed the billion dollar sales in 10 days. It became the best-selling game of 2022, according to industry researcher NPD Group.
The response from Microsoft and Activision
Microsoft had fought the regulatory battle in the UK and Europe with an eye-catching road show of press conferences in Brussels and full-page advertisements in British newspapers to try to sway sentiment about the deal.
“We remain fully committed to this acquisition and will appeal,” he said Brad Smith, president of Microsoft. “The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technological innovation and investment in the UK.”
“We have already started working on our appeal to the UK Competition Appeals Tribunal. We are confident in our case because the facts are on our side, this deal is good for competition,” she wrote in a statement. Bobby KotickCEO of Activision.
UK antitrust has said any potential remedy would need a degree of regulatory oversight and is generally against behavioral remedies.
The CMA has attempted to establish itself as a powerful global regulator since the country left the EU. In recent shows of force, he has targeted Big Tech, including the order a Meta Platforms to cancel the acquisition of Giphy following concerns it could take a stranglehold on the GIF market.