By Steffan Powell
Gaming correspondent
Microsoft’s $68.7bn (£55bn) deal to buy video game company Activision Blizzard has been blocked in the UK by the Competition and Markets Authority.
The proposed takeover would see Microsoft acquire such hit titles as Call of Duty and Candy Crush.
But the regulator said it was concerned the deal would offer reduced innovation and less choice for gamers in the fast-growing cloud gaming business.
Microsoft and Activision hit out at the decision and said they would appeal.
“The CMA’s report contradicts the ambitions of the UK to become an attractive country to build technology businesses,” a spokesperson for Activision said.
‘UK is clearly closed for business’
“We will work aggressively with Microsoft to reverse this on appeal.
“The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects. 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.”
Brad Smith, vice chairman and president of Microsoft, said the company was still committed to the acquisition.
“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,” he said.
“We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies.
“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.”
‘Undermine innovation’
To go through, the deal has to be approved by regulatory bodies in the UK, United States and European Union.
The CMA is the first of the three regulators to rule, meaning its decision could scupper the whole takeover.
The UK body said it was not concerned that the deal would distort competition in the console gaming market.
But Martin Coleman, who chaired an independent panel that investigated the proposal for the regulator, said it was vital to protect competition in the “emerging and exciting market” of cloud gaming.
“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,” he added.
He said Microsoft had submitted plans to address the CMA’s concerns, but they were not effective and “would have replaced competition with ineffective regulation”.
“Cloud gaming needs a free, competitive market to drive innovation and choice. That is best achieved by allowing the current competitive dynamics in cloud gaming to continue to do their job,” he added.
