UK Regulator Draws the Line on Activision Deal, Provoking Microsoft Outrage

The UK’s competition regulator has halted Microsoft’s $68.7 billion acquisition of Activision Blizzard, citing concerns over the deal’s impact on competition in the video game industry. The decision has prompted outrage from Microsoft, which has accused the regulator of ignoring the benefits of the deal and failing to appreciate the competitive landscape of the sector.

The Competition and Markets Authority (CMA) issued an initial enforcement order on April 7, which prevented Microsoft from integrating Activision’s operations while the regulator conducted its investigation. The CMA announced on April 26 that it had decided to refer the deal for an in-depth investigation, as it believed the transaction raised “significant competition concerns.”

The CMA cited concerns over the impact of the deal on the video game industry, stating that it could lead to a substantial lessening of competition in the market. It argued that the transaction could reduce competition in the supply of video game consoles and gaming software, as well as in the emerging markets for virtual and augmented reality gaming.

Microsoft has responded to the decision with anger, accusing the CMA of ignoring the benefits of the deal and failing to appreciate the competitive landscape of the sector. The company argued that the deal would allow it to “build on Activision’s storied history of creating iconic gaming franchises” and invest in new technologies that would benefit players and developers alike.

Microsoft also suggested that the CMA was out of touch with the video game industry, arguing that the regulator had failed to take into account the rapidly evolving nature of the sector and the competitive pressures faced by market participants. The company pointed to the fact that it already faced intense competition from companies such as Sony and Nintendo, as well as from new entrants such as Google and Amazon.

Industry analysts have expressed mixed views on the decision, with some arguing that the CMA’s concerns are valid and others suggesting that the regulator may be overestimating the potential impact of the deal on competition. Some have also suggested that Microsoft may be able to address the CMA’s concerns by agreeing to certain conditions, such as divesting certain assets or licensing its technologies to third parties.

The decision is the latest in a series of regulatory challenges facing Microsoft and other technology companies, as governments and regulators around the world seek to rein in the power of big tech firms. Microsoft has already faced regulatory scrutiny over its market dominance in the personal computer operating system market, and is currently under investigation by the European Union over its acquisition of speech recognition firm Nuance Communications.

The outcome of the CMA’s investigation into the Activision deal is expected to be closely watched by regulators and industry participants alike, as it could have significant implications for the future of the video game industry and the role of big tech companies in shaping its direction.