While all eyes were on them, the UK Competition Authority (CMA) today spoke out against Microsoft’s acquisition of Activision-Blizzard. A decision that surprised everyone as the latest noise suggested confirmation. We are examining the reasons for this refusal.
The cloud as a highlight
The CMA gives up its fears in the console market, but remains in the cloud market. It’s the latter, still in its infancy, that makes the spearhead of the agency’s judgment glow. Observing that the market is changing rapidly, she believes Microsoft’s current position is sufficient to ensure its sustainability without the need for Activision-Blizzard. She even claims that Microsoft is holding “60-70% of cloud gaming services currently« .
The deal would strengthen Microsoft’s market advantage by giving it control of key gaming content like Call of Duty, Overwatch, and World of Warcraft. Evidence available to the CMA suggests that absent the merger, Activision would begin delivering games via cloud platforms in the foreseeable future.
Solutions considered insufficient
However, Microsoft was quick to address the CMA’s concerns. We remember that the giant had announced the signing of several agreements with Nvidia, Nintendo or even Boosteroid that guarantee the presence of titles on competing platforms for a period of at least 10 years. However, these measures were not enough “Structuring” to the taste of the CMA who saw it as a short-cut of his authority on the market.
It is thus a form of permanent regulation of the sector, replacing market forces in a growing and dynamic marketplace with binding regulatory obligations overseen and ultimately enforced by the CMA – in this case globally.
She also assessed three points that did not meet expectations:
- They did not adequately cover the various business models of cloud gaming services, including multi-game subscription services.
- They weren’t open enough to providers who wanted to offer versions of games on PC operating systems other than Windows.
- They would normalize the terms under which games are available, rather than being dictated by the dynamics and creativity of market competition, as would have been expected in the absence of the merger.
Activision Blizzard and Microsoft are already on the offensive
The reaction of Activision Blizzard and Microsoft will not be long in coming. Within minutes of the CMA’s last communication, Brad Smith responded via Twitter that the fight was not over. In fact, the two giants have already started the appeal process against this decision. For Activision, it’s through its networks and in an email to the staff for sharing the news.
Together with Microsoft, we can and will appeal this decision. We have already started the appeal process to the UK Competition Appeal Tribunal. We are confident because the facts are on our side: this agreement is good for competition.
Bobby Kotic
So the fight will continue on a legal level and will last for a few more months. As a reminder, the redemption deadline is still set to June 18th. It would not be surprising if this date were extended given these new elements.
