The UK’s Competition and Markets Authority (CMA) has blocked Microsoft’s proposed acquisition of Activision Blizzard, citing concerns over competition in the cloud gaming sector.

The $69bn deal would have given Microsoft control over leading franchises like Call of Duty, which the CMA said could harm competition. While Microsoft had offered access to Activision’s Call of Duty to other cloud gaming platforms, the CMA said this was insufficient.

This marks the largest technology business deal blocked by the CMA and follows the watchdog’s decision to block Meta’s acquisition of Giphy in 2021. Microsoft has stated that it remains committed to the acquisition and plans to appeal the decision, while Activision has said it will work with Microsoft to reverse it.

Activision’s CEO, Bobby Kotick, told staff that while the decision was not what they wanted, it was “far from the final word” on the deal. The European authorities are expected to decide on the proposed deal’s fate by 22 May, and the Federal Trade Commission is also seeking to block it.

The CMA has stated that gaming is the UK’s largest entertainment sector, and cloud gaming is growing rapidly, with the potential to change the gaming industry by altering the way games are played. The watchdog said that cloud gaming needs a free and competitive market to drive innovation and choice, and Microsoft’s deal would have strengthened its already powerful position in the market, potentially undermining new and innovative competitors.

Activision’s shares fell by over 8% to around $79 following the CMA’s announcement. While the CMA has said that the deal may not result in a significant lessening of competition in console gaming services in the UK, it has concerns over Microsoft’s estimated 60-70% of global cloud gaming services and its competitive advantages. The cloud gaming market is expected to be worth £11bn globally by 2026.

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