Microsoft's proposed $68.7 billion acquisition of Activision Blizzard has been blocked by the UK's Competition and Markets Authority (CMA). The decision highlights the challenges faced by tech giants seeking to expand through mergers and acquisitions. In response, Brad Smith, Vice Chair and President of Microsoft, has announced the company's intention to appeal the decision.

CMA Concerned About Competition in the Gaming Industry

The CMA launched a six-month investigation into the proposed deal, which was announced in January 2022. The regulatory authority concluded that the acquisition could lead to a substantial lessening of competition in the UK market for video games and gaming consoles. This could result in higher prices and reduced choice for consumers, which prompted the CMA to block the deal.

Microsoft Committed to the Acquisition

Despite the CMA's decision, Microsoft remains committed to the acquisition. The company has already signed contracts to make Activision Blizzard's popular games available on 150 million more devices. Microsoft intends to reinforce these agreements through regulatory remedies, demonstrating its resolve to complete the deal.

Brad Smith Criticizes the CMA's Decision

Brad Smith expressed disappointment with the CMA's ruling, stating that the decision "rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom." He also criticized the CMA's understanding of the market and the way relevant cloud technology works, suggesting that the regulatory authority's decision reflects a flawed understanding of the market and its dynamics.

Regulatory Hurdles in the US and the EU

Microsoft's proposed acquisition of Activision Blizzard has also faced scrutiny from regulators in the US and the EU. The US Securities and Exchange Commission (SEC) recently extended its review of the deal, which could further delay its completion. The regulatory hurdles underscore the importance of competition in promoting innovation and ensuring that consumers have access to a wide range of choices at fair prices.

Conclusion 

The video game industry has seen significant growth in recent years, driven by the pandemic and the rise of esports. Microsoft's proposed acquisition of Activision Blizzard would have given it a significant advantage in the industry, but the company will now have to navigate regulatory hurdles in its pursuit of growth and expansion. The CMA's decision highlights the importance of maintaining competition in the market to promote innovation and ensure that consumers have access to a wide range of choices at fair prices.