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Microsoft And Activision Blizzard Deal Blocked In The UK (And Now We Know Why)

It looks like Microsoft and Activision Blizzard's long campaign to pull off one of the biggest acquisitions in gaming history might have hit an unsolvable snag: After a months-long investigation, UK's Competition and Markets Authority (CMA) has decided to officially veto the Microsoft deal from going forward in the UK.

This decision may come as a surprise to those who've been following the acquisition, as it seemed until recently that the CMA might have been rolling back on its hard stance against the possibility of Microsoft taking Activision games off rival platforms (the most notable and vocal opposition being Sony). In a March 24 press release that followed its first round of investigations, the CMA stated that it found the deal would "not result in a substantial lessening of competition in console gaming services," seemingly laying concerns over a console service monopoly to rest.

With the second phase of the investigation narrowing to the deal's effect on cloud gaming, things seemed rather positive for Microsoft's prospects at the time. However, the CMA has released a final report that concludes with the fear that the merger could present a near-monopoly that "risk[s] undermining the innovation that is crucial to the development of [cloud gaming] opportunities." As such, the deal will not be allowed to proceed in the UK at this time.

Things are looking dire for the merger

The report goes into detail about the factors going into the decision: in order to prevent Microsoft from dominating the cloud gaming sector, multiple remedial measures would need to be enacted and enforced by the CMA on an international scale. It's not hard to imagine why a UK governmental organization would be reluctant to oversee a global responsibility of this type. Even if it were, the report suggests that Microsoft's proposed regulations were insufficient in many aspects. In the end, the CMA concluded that the benefits of vetoing the merger outright outweighed the potential market growth the acquisition might bring.

Of course, Microsoft and Activision Blizzard aren't giving up on the fight entirely. Activision CEO Bobby Kotick released a letter to the Activision official news blog, calling the veto "far from the final word on this deal." Meanwhile, Microsoft President Brad Smith tweeted a statement declaring Microsoft's intention to appeal the decision.

However, this may be an overly optimistic outlook, at least according to experts. Merger strategist Aaron Glick told Bloomberg, "Essentially, there has never been a successful appeal in the UK on an antitrust decision." With Microsoft's appeal to the Federal Trade Commission hinging on the CMA's eventual acquiescence— as well as continued scrutiny from the European Commission — this may be the beginning of the end for the ambitious merger deal.