After over a year of lobbying and debating, the UK Competition and Markets Authority has blocked Microsoft's attempt to acquire Activision Blizzard, saying that the deal would give Microsoft too strong a position in the cloud gaming market "just as it begins to grow rapidly." Microsoft isn't giving up, but this isn't just an everyday regulatory hurdle: The deal "very well may be" dead, according to Bloomberg senior antitrust litigation analyst Jennifer Rie.
Rie speculates that overturning the CMA's decision could take "years" and that the deal isn't likely to hold together for that long. The acquisition has already been 15 months in the making, and even if not by multiple years as Rie predicts, the purchase agreement's July deadline will likely need to be extended. Ampere analyst Piers Harding-Rolls said on Twitter that he doesn't expect the CMA appeal to conclude within the year.
Speaking to the BBC, Harding-Rolls also said that there's "a chance" Microsoft can win the appeal, but that the CMA typically comes out on top of these things. "At the moment, the CMA's decision is pretty disappointing for Microsoft and their route toward the acquisition," he said.
Wedbush Securities analyst Michael Pachter (a figure who's mildly notorious in gaming forums for his adventurous speculations) is the most optimistic of the three. Speaking to GameSpot, Pachter said that Microsoft can win the appeal by offering the CMA one of two remedies for its cloud gaming concerns: "carve out Game Pass in the UK and keep all Activision Blizzard content off of the service" or "commit that they will keep the price of Game Pass at the current price plus no more than the rate of inflation (2-3% per year) for the next ten years." He thinks the deal will happen this summer as previously expected.
Microsoft did manage to quell other CMA concerns, convincing the agency that competition in the console market wouldn't significantly suffer from the acquisition. That's why the CMA's decision today was so surprising: Call of Duty was the center of attention throughout months of negotiation, and with that issue dealt with, it seemed like the deal was a go.
Microsoft and Activision Blizzard say they're still committed to pushing the acquisition through. Activision's statement was particularly strong, saying that the CMA did "a disservice to UK citizens, who face increasingly dire economic prospects" and that "the UK is clearly closed for business." The company says it will "work aggressively with Microsoft" to reverse the decision.
The UK isn't the only country worried about the Microsoft/Activision deal: The US Federal Trade Commission has also filed a complaint. If the UK had given the deal the thumbs up as expected, the FTC might have done the same, making a planned August hearing moot. Instead, the CMA made the FTC's case stronger, and since the UK appeal won't be over soon, we may see that first US hearing after all.
Responding to today's news, FTC Bureau of Competition director Holly Vedova said only: "We also have concerns, as explained in our complaint, about the anticompetitive effects of this deal."
