UK Government Blocks Microsoft and Activision’s Mammoth Gaming Megadeal

The British government recently refused to approve the $69 billion purchase of video game maker Activision Blizzard by Microsoft. They said this was because they were concerned that it would reduce competition in the market for games like Call of Duty in the growing industry of cloud gaming.

The Competition and Markets Authority state that the only way to fix the big loss of competition is to not let the two companies join together. The two companies disagree and said that they want to appeal against this rule.

Fifteen months ago, Microsoft wanted to buy a gaming company but was opposed by another gaming famous company called Sony. People were worried that it would allow Microsoft and its Xbox console too much control over popular games like Call of Duty and World of Warcraft. Surprisingly though, the UK agreed to let the deal go through causing even more confusion about what this means for everyone else around the world. According to game industry analyst Liam Deane, most people were surprised by their decision.

He said that this market could cause a lot of problems for Microsoft and Activision, but if the European Commission makes the wrong decision soon, it could get even worse.

The U.K.’s authorities were worried about how the deal would change cloud gaming. This is a technology that lets people play on their phones, tablets or other digital gadgets without purchasing expensive consoles or computers to game on. This means players can still use popular Activision titles like Candy Crush on whatever device they usually use.

Martin Colman, chair of the Competition and Markets Authority’s investigation group, thinks that cloud gaming has a big influence on the game industry because it allows people to choose where and how they play. He also believes that we need to make sure there is healthy competition within this developing market.

Europe is seen as the leader in trying to limit the power of big tech companies. The day before, the U.K. government proposed a law which gives watchdogs more power to protect people from online frauds and false reviews and helps produce more digital competition.

Microsoft was hoping for a favorable outcome from the U.K., but it didn’t happen. This could also have an effect on a lawsuit brought by the American Federal Trade Commission, which is going to trial on August 2nd. The European Union will make their ruling about this issue on May 22nd. Activision spoke up and said that this decision is bad for investors in the U.K., especially since the British economy has had some major difficulties lately.

Activision, a game making company based in California, said that they will work with Microsoft to appeal the decision against them as it goes against the U.K.’s goals of being friendly to tech companies. The company also stated that other big and small businesses can take this message that the UK might not be as inviting for business after all. Microsoft has also refused to accept defeat in this case.

President Brad Smith said that they will still go ahead with their acquisition plan and this decision by the authorities “rejects a path to solving competition-related worries” as well as it restrains technological innovation in the United Kingdom.

He also mentioned that it was very disappointing for them to learn about the clear lack of understanding towards the market and how cloud technology actually works after lengthy discussions about this matter.

Activision’s CEO, Bobby Kotick, wrote in a blog post that the companies have been asking the Competition Appeal Tribunal of the U.K. to allow them to do something. This is not the first time British forces have tried to prevent a big tech deal – before this, they did not let Facebook’s parent company buy Giphy because it could limit how much new things can be developed and might impact competition negatively. Facebook argued the decision but ultimately lost and had to sell Giphy instead.

Microsoft already has a big part of the cloud computing market and if they acquired Activision, it would give them access to lots of popular video game titles. To calm people’s worries Microsoft agreed to license those same games to Nintendo and other providers for at least 10 years so Sony couldn’t be left out. Sony hasn’t responded yet.

The watch group studied Microsoft’s plans “very hard” and they concluded that if the merger went ahead, they would need to supervise it. But stopping the deal will let cloud gaming grow naturally without extra help.

Cloud gaming is only a small part of the British video game market. But an expert predicts that it will experience an huge growth soon – user numbers are expected to triple between 2021 and the end 2022 with this industry’s value expected to increase up to 1 billion pounds within 5 years!

Last month, Microsoft decided that they wouldn’t make the popular game “Call of Duty” be exclusive just to their Xbox console. They realized doing this would not benefit them in any way and put away all worries related to it.