In response to concerns that it would impede competition in the rapidly expanding cloud gaming business, British regulators on Wednesday rejected Microsoft $69 billion acquisition of video game developer Activision Blizzard. This prevented the largest tech deal in history.
In its final report, the Competition and Markets Authority stated that “the only effective remedy” for the significant loss of competition “is to prohibit the Merger.” The organizations intend to file an appeal.
Due to concerns that Microsoft would gain control of well-known game franchises like Call of Duty, World of Warcraft, and Candy Crush, rival Sony vigorously opposed the all-cash transaction, and regulators in the United States and Europe closely examined it.
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Concerns raised by the U.K. watchdog centered on how the transaction might impact competitiveness in cloud gaming, which involves streaming games to smartphones, tablets, and other devices. Players no longer need to purchase pricey consoles and gaming laptops as a result.
According to Martin Colman, chair of the Competition and Markets Authority’s independent expert panel looking into the agreement, cloud gaming has the potential to transform the industry by offering players more flexibility over how and where they play. In this new and fascinating sector, he continued, “It is critical that we protect competition.”
The transaction still has our full support, and we will appeal, stated President Brad Smith in a statement. The watchdog’s judgment, according to him, “rejects a pragmatic path to address competition concerns” and deters tech investment and innovation in the UK.
Smith stated, “We’re especially disappointed that, after a lengthy decision, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works.” Likewise, Activision retaliated, stating that it will “work aggressively with Microsoft to reverse this on appeal.”
Last month, regulators raised their objections to the agreement, stating that it wouldn’t be advantageous for Microsoft to restrict Call of Duty to its Xbox gaming platform. The agency said on Wednesday that it had looked “in considerable depth” at Microsoft’s suggestions to allay competition worries, but that it had concluded that those remedies would necessitate its supervision, whereas blocking the merger would enable cloud gaming to evolve naturally.
Regulators came to the conclusion that if the acquisition went through, it would strengthen Microsoft’s edge by giving it ownership over important game franchises, given its dominant standing in the cloud computing sector.
Late last year, the US Federal Trade Commission filed a lawsuit to stop the agreement between Microsoft and Activision Blizzard. The FTC action is still in the document discovery phase, and a hearing to present evidence is set for August 2.
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