Following months of investigation, the UK’s Competition and Markets Authority (CMA) has today announced that it has “prevented” Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard.

In a statement, the CMA says that Microsoft’s solutions “failed to effectively address the concerns in the cloud gaming sector.” The regulator believes that if the deal were to go ahead, Microsoft would deem it “commercially beneficial” to make Activision Blizzard titles exclusive to its own cloud services.

“The CMA has prevented Microsoft’s proposed purchase of Activision over concerns the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come.” The regulator said.

“Microsoft has a strong position in cloud gaming services and the evidence available to the CMA showed that Microsoft would find it commercially beneficial to make Activision’s games exclusive to its own cloud gaming service.

“Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).

“The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content such as Call of Duty, Overwatch, and World of Warcraft. The evidence available to the CMA indicates that, absent the merger, Activision would start providing games via cloud platforms in the foreseeable future.

“The cloud allows UK gamers to avoid buying expensive gaming consoles and PCs and gives them much more flexibility and choice as to how they play.

“Allowing Microsoft to take such a strong position in the cloud gaming market just as it begins to grow rapidly would risk undermining the innovation that is crucial to the development of these opportunities.”

Responding to the CMA’s ruling, Microsoft vice chair and president Brad Smith said that the company will appeal the decision, and believes that this ruling stems from a “flawed understanding” of the cloud gaming market.

“We remain fully committed to this acquisition and will appeal.” A statement from Smith read.

“The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom.

“We have already sign contracts to make Activsion Blizzard’s popular games available on 150 million more devices, and we remain committed to reinforcing these agreements through regulatory remedies.

“We’re 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.”

We remain fully committed to our acquisition with @ATVI_AB and will appeal today's determination by the CMA. Here's our statement. pic.twitter.com/ylvDP5RUqQ

— Brad Smith (@BradSmi) April 26, 2023

Activision Blizzard CEO Bobby Kotick has also had his say on the CMA’s ruling, reaffirming that the decision “can and will” be appealed.

“Today, the Competition and Markets Authority (CMA), a regulatory agency in the UK, decided not to approve our merger with Microsoft. This isn’t the news we wanted – but it is far from the final word on this deal.” A statement from Kotick read.

“Alongside Microsoft, we can and will contest this decision, and we’ve already begun the work to appeal to the UK Competition Appeals Tribunal. We’re confident in our case because the facts are on our side: this deal is good for competition.

“The UK hopes to grow its leadership position in technology, and a combined Microsoft-Activision would accomplish exactly that.”

Kotick continues: “At a time when the fields of machine learning and artificial intelligence are thriving, we know the UK market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately.

“By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK gaming industry.”

“This merger is a complex process, and I know I’m not the only one frustrated by the hurdles and delays. We’re accustomed to a company culture that moves quickly to accomplish big goals, so it’s tough when we can’t close things out at our usual energetic pace. We’ll keep pressing our case, because we know that this merger will benefit our employees, the broader UK tech workforce, and players around the world.

“I’m going to do everything I personally can to advocate for us and help regulators understand the competitive dynamics in our industry.

“What gives me confidence is that, whether on our own or united with another company, we are one of the strongest companies in our industry, poised for continued growth, and building on our incredible IP.

“I appreciate your continued hard work and focus, and for continuing to connect and engage our players around the world. This is the best time to be in our field, and you all represent the best of our industry.  We’ll be sure to keep you updated on next steps as they happen.”

Prior to today’s ruling, it appeared as though the CMA were more open to approving the acquisition, after partially reversing some of its provisional findings from February. Microsoft had also made efforts to ease regulator concerns surrounding cloud gaming, having stuck deals with several cloud gaming services, including Nvidia’s GeForce Now.

Elsewhere, the European Commission is expected to publish its verdict on the acquisition by May 22nd. It’s believed that Microsoft has eased EU antitrust concerns significantly following licensing deals with rivals such as Nintendo.