The British competition authority blocks the merger of Activision Blizzard and Microsoft. Acti-CEO Bobby Kotick is therefore taking action against the authority, but they are not taking it lying down.
The biggest topic in gaming right now is the planned acquisition of Activision Blizzard by the US company Microsoft – nearly 70 billion US dollars are supposed to flow.
However, the major competition authorities in the US, UK, and EU raised alarms – for such large deals, they want to first check whether the acquisition poses a threat to markets. They want to prevent a monopoly from forming. The authorities even have the power to block such deals.
And that’s exactly what happened: the British competition authority CMA (Competition and Markets Authority) opposes the acquisition and explains this with the cloud gaming sector. Activision Blizzard lost well 7 billion US dollars in value within 31 minutes.
Microsoft and Activision Blizzard immediately made it clear that they will continue to hold on to the deal. Acti-CEO Bobby Kotick even used quite strong words and accused the CMA authority of incompetence. CMA head Sarah Cardell did not let that go unanswered, shot back, and provided insights into the decision.
Activision CEO says the authority does not understand the business
What did Kotick say? In an interview with the US medium CNBC, the CEO of Activision Blizzard directed unusually strong words against the competition authority of the UK:
[…] And what it demonstrated to us is that these regulators, they don’t really understand our business. And so, they’re making determinations and judgments that are not factually correct, and I think when you go to the tribunal, that’s what you have to focus on is whether it was irrational.
[…] And it showed us that these regulators do not really understand our business. And so they are making determinations and judgments that are not factually correct, and I think when you go to court, you have to focus on whether it was irrational or not.
Source: CNBC
The CEO of Activision Blizzard is accusing the authorities of lacking the competence to make a correct and rational decision in this case.
During the further interview, it becomes clear that Kotick is less referring to the cloud market, the reason for the CMA’s blockade. Kotick draws comparisons that as an independent company, they compete with giants like Tencent globally, and as a team with Microsoft, they can perform better.
Authority says: Deal would prevent innovation and competition
What did Cardell say? The head of the CMA makes it clear that the decision is based solely on the market of cloud gaming in the UK. She apparently did not want to let Kotick’s statement sit without a response. In an interview with Sky, Cardell said:
We know what we are doing and we have conducted a very thorough investigation. The investigation lasted 6 months and we carefully considered all details. We concluded that the best thing is to keep this market open for competition to ensure that other competitors can effectively survive in a market that is growing and evolving.
Source: Sky News
There are about observers of the case who criticize that the cloud gaming market is still far too small to name it as a reason to block the acquisition.
Cardell counters that the future and the current dynamics of the market have played a significant role. The number of users for cloud gaming has tripled over the past years, which is an important signal that this market needs protection from overly strong competitors.
Cardell explains that Microsoft already has a strong position in cloud gaming – through the Windows operating system, the ecosystem around Xbox, and Microsoft’s previous successes in the cloud gaming market. This could prevent offerings and innovations from competitors.
The gaming portfolio of Activision Blizzard would further strengthen this position, and therefore the deal was blocked.
Currently, it is hard to predict what impact the CMA’s decision will have on the planned merger. Experts are currently discussing everything from “could continue in a few months” to “cannot make another attempt for 10 years.”
What is certain: The merger has become considerably more complicated.
If you have questions or opinions on the topic, leave a comment. If you prefer to read more about the gaming market, take a look here: Why have hardly any good new MMORPGs been released for 9 years?
