Activision Blizzard: UK Blocks Microsoft’s Takeover of One of World’s Biggest Video Game Developers

London (CNN) It is with the UK antitrust regulator blocked Microsoft’s acquisition of Activision Blizzard threatens to upend the tech industry Huge deals There are concerns that this will stifle competition in cloud gaming.

Competition and Market Authority a Report Wednesday worried the deal would lead to “less innovation and less choice for UK gamers in the coming years”.

The acquisition was valued at $69 billion when announced early last year Microsoft (MSFT) “Even stronger” in cloud gaming, a market where it already has a 60%-70% share globally, the regulator added.

Activision’s stock price fell Microsoft shares rose 8%, up 11% on Wednesday.

Activision Blizzard (ATVI) One of the biggest video game developers in the world, having created games like “Call of Duty,” “World of Warcraft,” “Diablo” and “Overwatch.” Microsoft, which sells the Xbox gaming console, also offers a video game subscription service called Xbox Game Pass, as well as a cloud-based video game streaming service.

The deal to merge the businesses has met with growing opposition from antitrust regulators around the world. In December, the US Federal Trade Commission sued to block the takeover On similar competitive concerns. A hearing is scheduled for August. There is also the European Union Evaluating the transaction.

Regulators are “cooperating very closely,” said Alex Hafner, a partner at London law firm Flatgate, who described the UK decision as “seismic” even though it only applies to the companies’ activities in Britain.

“It has potential implications for them [other regulatory] decisions,” he added. “It’s hard to see how the deal can proceed without approval from all three regulators.”

In its ruling, the Competition and Markets Authority said Microsoft may seek to make Activision’s games exclusive to its own platforms, and then increase Game Pass subscription prices.

“The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs, and gives them more flexibility and choice in how they play. Allowing Microsoft to take such a strong position in the cloud gaming market is dangerous. It undermines innovation that is vital to the growth of these opportunities,” it added.

“Available evidence… indicates that Activision will begin delivering games via cloud platforms in the near future, if not merged.”

Microsoft, Activision plan to appeal

Both companies plan to appeal the decision. “Together with Microsoft, we will fight this decision and we have already begun work on an appeal to the UK Competition Appeals Tribunal,” Activision Blizzard CEO Bobby Kotick said in a statement.

Microsoft president Brad Smith added: “This decision reflects a misunderstanding of the market and the way related cloud technology actually works.”

However, their chances of success at the tribunal may be slim. “It’s hard to win these appeals because you have to show it was an unreasonable decision,” said Hafner, the competition attorney. “The bar is set very high for success,” he told CNN.

The Enterprise Act 2002 gives the UK Competition and Markets Authority wide-ranging powers to block agreements it deems to harm competition.

It has used this power in the past to block the takeover of Sky News by 21st Century Fox and the sale of Asda supermarkets to rival Sainsbury’s.

The regulator, which launched an in-depth review of the Blockbuster gaming deal in September, said Microsoft’s proposed solutions to its concerns were “significantly flawed”.

“Their proposals … would have distorted competition through ineffective regulation in a new and dynamic market,” explained Martin Coleman, chairman of the independent panel of experts conducting the inquiry.

“Microsoft already enjoys a powerful position and head start over other competitors in cloud gaming, and this deal will strengthen that advantage, giving it the ability to undermine new and innovative competitors,” Coleman continued. “Cloud gaming needs a free, competitive market to drive innovation and choice.”

According to the Competition and Markets Commission, the UK cloud gaming market is expected to be worth £1 billion ($1.2 billion) by 2026, accounting for 9% of the global market.

— Josh Du Lac and Brian Fung contributed reporting.

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