Microsoft-Activision Deal Divides Regulators

While market watchdogs in the European Union and China have given the green light, the software giant is still fighting battles in the US and UK to get the deal approved.

Microsoft Corp. president Brad Smith is expected to meet with UK Chancellor Jeremy Hunt this week to discuss Britain’s decision to block a $69 billion takeover of Activision Blizzard Inc., according to Bloomberg.

Officials from the Competition and Markets Authority first vetoed the deal on April 26, citing concerns that it would suppress competition in cloud gaming.

If the purchase goes ahead, Microsoft will get hold of several iconic video-game franchises, including Call of Duty, Warcraft and Overwatch, expanding the offerings on its Xbox Game Pass cloud gaming service. Critics—including Sony, which owns Xbox’s biggest rival, PlayStation—say the deal is bad for competition.

Not everybody agrees. The EU approved the deal after Microsoft promised that gamers could play Activision titles on rival cloud gaming services for up to 10 years. China had gone a step further with unconditional approval. Regulators in South Africa, Japan, Chile, Brazil and Saudi Arabia have also given the nod.

But even with this degree of international support, the acquisition isn’t a done deal. In the US, where Microsoft just won a private suit brought by gamers seeking to block the transaction, the Federal Trade Commission is still scrutinizing the deal. Meanwhile, the UK’s Competition and Markets Authority is standing firm in its decision to block it, making a lengthy appeal process likely.  

According to the UK government’s website, the CMA’s objections remain the biggest obstacle so far. The regulator said,  “The deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.” If Microsoft and Activion appeal, a final UK decision is expected by the end of the year. 

Microsoft, of course, has the option of completing the transaction without the CMA’s approval, but that would mean its gaming division would have to withdraw from the UK market or stop offering cloud-gaming services in the country. There is no indication yet that this is the route Microsoft will take.

In any case, this latest wrangling is unlikely to be the last, as regulators, particularly in the US and Britain, increasingly scrutinize multibillion-dollar technology deals. As such, the outcome will likely inform the dynamics of future mergers and acquisitions activity within the tech industry.