LONDON (AP) 鈥 British antitrust regulators on Wednesday blocked Microsoft鈥檚 $69 billion purchase of video game maker Activision Blizzard, thwarting the biggest tech deal in history over worries that it would stifle competition for popular titles like Call of Duty in the fast-growing cloud gaming market.
The Competition and Markets Authority said in its final report that 鈥渢he only effective remedy鈥 to the substantial loss of competition 鈥渋s to prohibit the Merger.鈥 The companies have vowed to appeal.
The all-cash deal faced , which makes the PlayStation gaming system, and also was being scrutinized by over fears that it would give Microsoft and its Xbox console control of hit franchises like Call of Duty and World of Warcraft.
The U.K. watchdog's decision 鈥渃ame as a surprise to most people鈥 and heightens global uncertainty over the deal, said Liam Deane, a game industry analyst for research firm Omdia.
鈥淚t鈥檚 a big enough market to throw a pretty serious spanner in the works from Microsoft and Activision鈥檚 perspective, but things will get a lot worse if they also get the wrong decision from the European Commission in a few weeks time,鈥 he said.
The U.K. watchdog鈥檚 concerns centered on how the deal would affect cloud gaming, which streams to tablets, phones and other devices and frees players from buying expensive consoles and gaming computers. Gamers can keep playing major Activision titles, including mobile games like Candy Crush, on the platforms they typically use.
Cloud gaming has the potential to change the industry by giving people more choice over how and where they play, said Martin Colman, chair of the Competition and Markets Authority鈥檚 independent expert panel .
鈥淭his means that it is vital that we protect competition in this emerging and exciting market,鈥 he said.
The decision underscores Europe鈥檚 reputation as the global leader in efforts to . A day earlier, the U.K. government unveiled draft legislation that would to protect consumers from online scams and fake reviews and boost digital competition.
The U.K. decision further dashes Microsoft鈥檚 hopes that a favorable outcome could help it resolve a lawsuit brought by the U.S. Federal Trade Commission. A trial before the FTC鈥檚 in-house judge is set to begin Aug. 2. The European Union鈥檚 decision, meanwhile, is due May 22.
Activision lashed out, portraying the watchdog's decision as a bad signal to international investors in the United Kingdom at a time when the .
The California-based game maker said it would 鈥渨ork aggressively" with Microsoft to appeal, asserting that the move 鈥渃ontradicts the ambitions of the U.K." to be an attractive place for tech companies.
"We will reassess our growth plans for the U.K. Global innovators large and small will take note that 鈥 despite all its rhetoric 鈥 the U.K. is clearly closed for business,鈥 Activision said.
Redmond, Washington-based Microsoft also .
鈥淲e remain fully committed to this acquisition and will appeal,鈥 President Brad Smith said in a statement. The decision 鈥渞ejects a pragmatic path to address competition concerns" and discourages tech innovation and investment in Britain, he said.
鈥淲e鈥檙e 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,鈥 Smith said.
Activision CEO Bobby Kotick said in a blog post that both companies have begun working on an appeal to the U.K.'s Competition Appeal Tribunal.
It鈥檚 not the first time British regulators have flexed their antitrust muscles on a Big Tech deal. They previously blocked Facebook parent Meta鈥檚 purchase of Giphy over fears it would limit innovation and competition. The social media giant and was forced to sell off the GIF sharing platform.
Microsoft already has a strong position in the overall cloud computing market, and regulators concluded that if the deal went through, it would reinforce the company鈥檚 advantage by giving it control of key game titles.
In an attempt to ease concerns, Microsoft struck deals with Nintendo and some cloud gaming providers like Call of Duty for 10 years 鈥 offering the same to Sony.
Sony's European press office did not respond to a request for comment.
The watchdog said it reviewed Microsoft鈥檚 remedies 鈥渋n considerable depth鈥 but found they would require its oversight, whereas preventing the merger would allow cloud gaming to develop without intervention.
Cloud gaming is a small piece of Britain鈥檚 5 billion pound ($6.2 billion) video game market. But an expert forecast suggested it will see explosive growth over the coming years, with user numbers tripling from the start of 2021 to the end of 2022 and the cloud game market expected to grow to a value of 1 billion pounds by 2026, regulators said.
They that the deal would hurt console gaming, saying it wouldn't benefit Microsoft to make Call of Duty exclusive to its Xbox console.
___
AP Technology Writer Matt O'Brien in Providence, Rhode Island, contributed to this report.
