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A decision by Britain’s competition regulator to block a $69bn (£55bn) company takeover that would have created one of the world’s biggest gambling groups has sparked a major dispute over whether the UK is “closed for business”.
The Competition and Markets Authority (CMA) vetoed Microsoft’s takeover of Activision Blizzard, the maker of games including Candy Crush and Call of Duty, dealing a potentially fatal blow to the worldwide deal.
The CMA said it has prevented the deal over competition concerns in the cloud gaming sector, forecasting the market to be worth £11bn worldwide by 2026.
Martin Coleman, chair of the independent panel of experts conducting the investigation, said: “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.”
“No other cloud gaming operator has this combination of advantages, which partly explains Microsoft’s current UK market share of between 60 and 70 per cent,” the CMA said.
Mr Coleman said Microsoft’s plans to mitigate CMA concerns “were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market”.
The decision angered both companies. Brad Smith, president of Microsoft, one of the world’s biggest software companies said they remained committed to the deal and will appeal against the decision.
“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,” Mr Smith said.
“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.”
He accused the CMA of having a “flawed understanding” of the gaming market. Microsoft has previously said the deal is important for its mobile gaming ambitions.
Activision Blizzard went further, claiming the CMA’s report contradicts the ambitions of the UK “to become an attractive country to build technology businesses”.
“The report’s conclusions are a disservice to UK citizens, who face increasingly dire economic prospects.
“We will reassess our growth plans for the UK. Global innovators large and small will take note that – despite all its rhetoric – the UK is clearly closed for business.”
In a later message to Activision staff, chief executive Bobby Kotick wrote: This isn’t the news we wanted – but it is far from the final word on this deal. We’re confident in our case because the facts are on our side: this deal is good for competition.”
He claimed that, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry.”
The EU’s antitrust watchdog is set to rule on the takeover next month while the US Federal Trade Commission is expected to examine the case in the summer.
The CMA’s ruling came as a surprise ruling after last month dropping its concerns about the impact of the deal on the console market led by Sony’s market-leading PlayStation.
The UK watchdog’s decision “came as a surprise to most people” and heightens global uncertainty over the deal, said Liam Deane, a game industry analyst for research firm Omdia.
“It’s a big enough market to throw a pretty serious spanner in the works from Microsoft and Activision’s perspective, but things will get a lot worse if they also get the wrong decision from the European Commission in a few weeks’ time,” he said.
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