The British antitrust watchdog blocked the takeover attempt, in a decision that will be closely watched in Washington and Brussels.
Microsoft’s video-game bet suffers a huge blow
Britain’s mergers regulator on Wednesday blocked Microsoft’s $69 billion takeover bid for Activision Blizzard, ruling that buying the maker of “Call of Duty” would give the tech giant too much control of the thriving market for cloud-based video games.
The decision — which surprised many investors after the Competition Markets Authority narrowed the focus of its inquiry earlier this month — poses a serious hurdle for the deal, which already faces opposition from the F.T.C. and is under scrutiny by the E.U. Shares in Activision tumbled 12 percent in premarket trading, while Microsoft’s stock was up almost 8 percent after a solid earnings report.
The deal risks “undermining the innovation” happening in cloud gaming, the C.M.A. said, by giving control of popular game titles to Microsoft, which owns the Xbox platform. (Cloud gaming isn’t reliant on users owning expensive consoles.) The regulator wasn’t swayed by promises from Microsoft — which already accounts for up to 70 percent of cloud gaming — to give access to its top games to rivals like Sony and Nintendo.
Combining Microsoft and Activision could lead to higher prices and fewer choices for consumers, the regulator concluded: “Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming and this deal would strengthen that advantage giving it the ability to undermine new and innovative competitors,” Martin Coleman, who chaired a panel that conducted an investigation for the C.M.A., said in a statement.
Microsoft pledged to plow ahead, with its president, Brad Smith, saying that the company would appeal. “This decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works,” he said in a statement.
Company executives and investors had taken heart from the C.M.A.’s decision weeks ago to focus solely on cloud gaming concerns, rather than looking at the broader issue of console competition.
But the path to completing the deal just became harder. Microsoft would be hard-pressed to seal the takeover without winning approval in Britain, which has a sizable video-game market. Moreover, appealing a decision by the C.M.A. requires meeting a high bar, since that process looks mainly at whether the regulator acted rationally and lawfully.
Meanwhile, the European Commission is expected to rule on the takeover by May 22.
Then there’s the matter of timing: Microsoft had previously set a deadline of July 18 to close the deal, though it could seek to push that back pending the appeal.HERE’S WHAT’S HAPPENING
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