UK Competition Authority Blocks $92 Trillion MS-Activision Acquisition

Microsoft's (MS) plan to acquire Activision Blizzard, which had attracted attention as a 'mega deal in the tech sector,' has been halted by the UK competition authorities.

On the 26th (local time), the UK Competition and Markets Authority (CMA) opposed the merger, expressing concerns that if MS acquires Activision Blizzard, it would hinder innovation in the cloud gaming market and reduce consumer choice. Since beginning an in-depth review in September 2022, the CMA concluded, "This acquisition could change the future of the rapidly growing cloud gaming market and may lead to reduced innovation and fewer choices for users over the coming years."

[Image source=Reuters Yonhap News]

According to the CMA, MS currently holds a 60-70% share of the global cloud gaming market and owns its own platform (Xbox), PC operating system (Windows), and global cloud computing infrastructure (Azure, Xbox Cloud Gaming). The CMA pointed out, "MS holds a strong position in the cloud gaming market" and "MS has demonstrated that it is commercially beneficial to offer Activision Blizzard’s games exclusively on its own cloud gaming service."

Earlier, MS announced in early last year its plan to acquire Activision Blizzard for approximately $69 billion (about 92 trillion KRW). This was expected to be the 'deal of the century' in the tech sector since the $67 billion EMC acquisition in 2016. Activision Blizzard is a developer owning popular games such as Call of Duty, Candy Crush, and World of Warcraft. Through this acquisition, MS aimed to become the world's third-largest game company, following Tencent and Sony.

Initially, MS planned to complete the acquisition of Activision Blizzard by mid-year. However, with the UK, where approval was expected, putting the brakes on the deal, concerns are rising that this could affect decisions in other countries. For the acquisition to be finalized, MS must pass reviews by competition authorities in 16 countries, including the United States, the European Union (EU), and China.

The Wall Street Journal (WSJ), citing legal experts, identified the CMA as one of the biggest obstacles. The outlet referenced previous cases where the CMA opposed mergers such as the travel booking company Sabre and competitor Paylogic, stating, "Due to the CMA's decision, deals had to be abandoned globally."

MS has stated it will immediately appeal the CMA's decision. Brad Smith, MS Vice Chairman, expressed disappointment, saying, "We are disappointed by a decision that reflects a misunderstanding of how cloud technology actually works," and announced plans to appeal. Activision Blizzard also pushed back, stating, "Global innovators will note that the UK is clearly closed off to business." However, WSJ, citing experts, predicted that while the appeal process in the UK might proceed relatively quickly, overturning the CMA's decision would be difficult.

Currently, besides the UK, the US and the EU are also closely monitoring the acquisition. Immediately after the CMA's decision, Holly Vedova, a competition official at the US Federal Trade Commission (FTC), said, "We also expressed concerns about the anti-competitive effects of this deal." Earlier this year, the FTC filed a lawsuit against MS and will hold a hearing at the administrative court in August. The European Commission, the EU's competition authority, is expected to reach a conclusion by May 22.

Meanwhile, on the morning of the same day in the New York stock market, Activision Blizzard's stock was trading about 11% lower compared to the previous session. MS, which released better-than-expected earnings after the market closed the previous day, showed an increase of nearly 8%.

This content was produced with the assistance of AI translation services.