The UK Competition and Markets Authority (CMA) has confirmed that it intends to block Microsoft’s megadollar acquisition of Activision, concluding that such a merger would create “…the most powerful
operator” in the cloud gaming market.
CMA noted that with a current share of 60-70%, acquiring Activision’s portfolio of games would “substantially weaken competition” in the market. He added that Microsoft would also have the incentive to withhold such games from competing gaming platforms.
the story so far
By way of brief summary, Microsoft first revealed plans to buy Activision in a whopping $68.7 billion deal last January, a move that would essentially make Microsoft the world’s third-biggest gaming company by revenue behind Tencent and Sony, while also giving it direct control over mega-franchises like Call of Duty and World of Warcraft.
Last July, the CMA confirmed that it was launching an antitrust investigation in the deal, then two months ago the regulator gave the strongest indication yet that he was preparing to block the merger when provisionally terminated “could hurt UK players” by creating higher prices, less choice and less innovation. Then last month the CMA narrowed his position focus entirely on cloud gaming, instead of console gaming.
He wrote at the time:
The CMA has received a significant amount of new evidence in response to its original provisional findings. Having carefully considered this new evidence, along with the wide range of information collected before those interim findings were issued, the CMA investigative group updated its interim findings and came to the interim conclusion that, overall, the transaction will not be successful. in a substantial decrease in competition in relation to console games in the UK.
Microsoft Vice President and President Brad Smith issued a statement immediately after the CMA released its final position today, saying that Microsoft intends to appeal the decision while noting recent moves it has made to alleviate competition concerns, including signing agreements that would see Activision Blizzard games become available on rival devices. Smith wrote:
We remain fully committed to this acquisition and will appeal. He The CMA decision rejects a pragmatic path to address competition concerns and discourages technological innovation and investment in the UK.
We have already signed contracts to make the popular Activision Blizzard games available on 150 million more devices, and we remain committed to reinforce these agreements through regulatory remedies.
We are particularly disappointed that, after lengthy deliberations, this decision seems to reflect a misunderstanding of this market and the way the relevant cloud technology actually works.
-Brad Smith, Vice President and President
In fact, Microsoft has made several commitments toward keep Activision games on rival platforms like Sony, Nintendo, and Steam over a 10-year period. However, the CMA has taken the position that Microsoft’s proposals cannot replace existing “competitive dynamism” and would simply offset the loss of competition through “behavioral obligations” for only 10 years.
The CMA wrote:
We had to consider how best to remedy these concerns. Avoiding the merger would preserve the competitive dynamism and level of innovation that exists in the growing cloud gaming market. Instead, Microsoft proposed a remedy that sought to compensate for the loss of competition with a set of obligations that would regulate its behavior and way of doing business for a period of ten years.
Having carefully considered Microsoft’s proposal, we found that it would not restore the competitive dynamism that would be lost as a result of the Merger. We therefore decide that a remedy that preserves competition, rather than one that imposes global regulatory oversight, is the only effective and proportionate way forward.
This is a breaking story, please update for updates
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