Activision Blizzard Acquisition Blocked By UK Regulator, Microsoft Says It Will Appeal: Gaming Experts Weigh In

The U.K.'s Competition and Markets Authority (CMA) announced it is blocking Microsoft Corp.'s MSFT $68.7 billion proposed acquisition of Activision Blizzard Inc. ATVI.

The British regulatory body cited concerns the deal would have a negative impact on the fast-growing cloud gaming market, stating Microsoft had not addressed these concerns effectively.

“Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service,” the CMA said in a press release.

See Also: Why Activision Blizzard (ATVI) Stock Is Plunging Today

Brad Smith, Microsoft vice chair and president, reacted to the CMA's decision on Twitter.

"We remain fully committed to this acquisition and will appeal. The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom," Smith wrote.

"We have already signed contracts to make Activision Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies. We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works," he added.

Activision Blizzard CEO Bobby Kotick also expressed his dissatisfaction with the CMA's resolution: "This isn’t the news we wanted — but it is far from the final word on this deal."

"Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the U.K. Competition Appeals Tribunal. We’re confident in our case because the facts are on our side: this deal is good for competition," Kotick said.

See Also: Why Microsoft Shares Are Moving Higher Wednesday

He argued that a combined Microsoft/Activision would strengthen the U.K.'s position as a technology leader and provide significant benefits to consumers, particularly in the fields of machine learning and artificial intelligence.

Kotick also warned the CMA decision could have negative consequences for the U.K. gaming industry, including stifling investment, competition and job creation.

"At a time when the U.K. hopes to grow its leadership position in technology, we know the U.K. market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately," he said.

Meanwhile, an Activision Blizzard spokesperson shared an even stronger statement, saying that the report's conclusions were a "disservice to U.K. citizens" who are already facing "increasingly dire economic prospects."

"The CMA’s report contradicts the ambitions of the U.K. to become an attractive country to build technology businesses. We will work aggressively with Microsoft to reverse this on appeal."

The spokesperson warned the CMA decision would send a discouraging message to global innovators, stating that "despite all its rhetoric, the U.K. is clearly closed for business."

"We will reassess our growth plans for the U.K.," Activision Blizzard warned.

Gaming Industry Reacts To U.K. CMA Block On Microsoft's Acquisition Of Activision Blizzard

The CMA decision was been met with widespread reactions from gaming experts and industry analysts, who focused on its potential impact on the industry as a whole and emphasized the amount of time the appeal will take.

For example, gaming journalist Benji Sales wrote: "Crazy news. Microsoft says they will fight it, but now with attempts to block by both FTC in the U.S. and CMA in the U.K. this isn't ending anytime soon. Likely getting dragged out until 2024."

Imran Khan, head of PR at the video game developer MyDearest and a reporter, said: "I wonder at what point Microsoft throws in the towel on this. Surely they’re wary of setting a precedent for future acquisitions but this is looking like an appeal will push this process out a year or more."

Games industry analyst Piers Harding-Rolls, tweeted: "Microsoft has said it will appeal the CMA decision The Competition Appeal Tribunal site says straightforward cases are aimed to be dealt with within 9 months - if MS wins it gets returned to the CMA Chances of this closing this year are now slim. That means we get the FTC case." 

Mat Piscatella, executive director and video game industry analyst at Circana, expressed the CMA verdict seemed strange to him and suggested that the organization's predictions on the cloud gaming market aren't accurate.

"The takes are hot and flowing today. Anyways it's (IMO) odd to point to what a market may (or may not) look like in ten years to block something today. And the cloud market isn't growing all that fast. The whole thing seems a bit off. Oh well, off to appeal everyone goes."