You’ll never guess the reason why.
So that huge merger between Microsoft and Activision Blizzard? Well, that’s not happening now… or at leas, for the time being it won’t. Because Britain’s antitrust watchdog vetoed the deal. And the reason why they did is the best part.
Because it would create unfair competition in the cloud gaming marketplace.
Even Microsoft offering to open sale of Call of Duty games (one of the crown jewels of the acquisition, even if I hate it) on other platforms was not enough to placate the Competition and Markets Authority (Britain’s antitrust organization). Microsoft plans to appeal the decision.
That said, this is one of the biggest acquisitions of all time, and neither the European Union or the US Federal Trade Commission have made their decisions yet. Worse, for Microsoft, the deal falling apart would still incur some significant loss; they would be forced to pay a breakup fee of up to $3 billion.
Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors,
Martin Coleman, Panel Chair of the antitrust investigation
Yeah, you know, cloud gaming. That thing that has never once been a standalone success in and of itself. You know, like Stadia, which is already dead. How the UK got stuck on this particularly is anyone’s guess.
We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the UK.
Brad Smith, vice chair and president of Microsoft
The CMA claims that the merger would give Microsoft too much power over the market thanks to titles like Call of Duty, Overwatch, and World of Warcraft. They also claim that Activision could provide games on cloud platforms in the future without the merger.
We’ve already begun the work to appeal to the UK Competition Appeals Tribunal. We’re confident in our case because the facts are on our side, this deal is good for competition,
Bobby Kotick, Activision CEO
The CMA has claimed that any potential remedy would require some amount of regulatory oversight, and it’s typically against such remedies. Important to note, as since the UK left the EU, they’ve flexed this sort of power more and more. Notably, they recently forced Meta Platforms Inc. to reverse their acquisition of Giphy.
Essentially, there has never been a successful appeal in the UK on an antitrust decision. There does not appear to be a path forward for Microsoft.
Aaron Glick, merger arbitrage strategist, TD Cowen
The deal isn’t technically dead and in the ground, though… at least not yet. The European Commission will give their decision on May 22nd, while the FTC has a hearing scheduled for August this year.
Source: Bloomberg
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