Activision Declares UK ‘Closed for Business’ For Blocking £55bn Microsoft Merger

Activision Blizzard has accused the UK of being “closed for business” after a competition watchdog blocked Microsoft’s takeover of the popular video game developer. 

The £55 billion ($69 billion) all-cash deal was on track to becoming the high-paying merger in the history of the tech industry.

But the UK'S Competition and Markets Authority (CMA) said the move, which has faced fierce opposition from Sony, would stifle competition in the cloud gaming industry. 

“The deal would reinforce Microsoft's advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft, the CMA said in a statement posted on the UK government website. 

"The evidence available to the CMA indicates that absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.

"Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities."

Cloud gaming enables users to access games via companies’ remote servers — effectively streaming a game like a TV show or movie on Netflix

The technology is still in the early stages of development, but Microsoft is betting big on it becoming a new way of playing games – and its acquisition of Activision would have provided an expansive collection of popular games to test the technology on. 

Regulators around the world, however, are concerned Microsoft’s control on this new way of gaming would allow them to monopolise the gaming industry. 

Along with the CMA, regulators in the EU continue investigating the deal to assess whether it hurts competition, while the US Federal Trade Commission has sued to block it on the grounds of antitrust. 

“Closed for Business”

Despite the Block, Microsoft President Brad Smith said that the tech giant “remain[s] fully committed to this acquisition”, and immediately vowed to appeal the decision. 

He added that the CMA’s ruling "rejects a pragmatic path to address competition concerns" and discourages tech innovation and investment in the UK.

“We're especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.”

News of the CMA’s decision sent shares in Activision Blizzard spiralling by 12 per cent, falling more than 10 per cent in pre-market trading.

A spokesperson from Activision said: “The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses. We will work aggressively with Microsoft to reverse this appeal.”

“We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”

🚨 | NEW: Rishi Sunak’s boast to make the UK the “world’s next Silicon Valley” is being publicly MOCKED by Microsoft and Activision tonight after the government blocked their takeover

“despite all its rhetoric - the UK is clearly CLOSED for business” pic.twitter.com/JAcQCHZre2

— Politics UK (@PolitlcsUK) April 26, 2023

Regardless of the block, Bobby Kotick, CEO of Activision Blizzard, told employees in a letter the company and Microsoft have “already begun the work to appeal to the UK Competition Appeals Tribunal.”

“At a time when the fields of machine learning and artificial intelligence are thriving, we know the U.K. market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately.”

“By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry,” he added. 

The UK’s big-tech crackdown 

The block follows the CMA’s decision in October last year to prevent Meta from acquiring the animated gif search engine Giphy.

Cloud gaming is so small that it does not even appear on the Newzoo Global games chart for the end of the year.

The CMA literally blocked the Activision Blizzard acquisition/merger over a very tiny market.

A market that other game companies can compete in by offering exclusives pic.twitter.com/cKsWLpGsyd

— PeterOvo (808) (@PeterOvo5) April 26, 2023

Anne Witt, a law professor and member of the EDHEC Augmented Law Institute, said that the regulator’s decision demonstrates its commitment in prevent big tech from taking control of key market areas in the country. 

“The CMA is the only competition agency globally to have ever prohibited a big-tech merger, and now they’ve done it twice.

“While the UK is a little behind in terms of platform regulation, the CMA is really taking a leadership role in big-tech merger control.”

Analysts believed the move would allow Microsoft to catch up with Sony, whose PlayStation has significantly outsold the Xbox for years. 

Microsoft already has control of other key markets in the tech world – most recently the generative AI space following its $11 billion investment into ChatGPT creator OpenAI.