The United Kingdom blocks Microsoft from its acquisition of Activision Blizzard

London (CNN) The UK antitrust regulator has blocked Microsoft’s purchase of Activision Blizzard threatens to demoralize one of the tech industry The biggest deals Because of concerns that it will stifle competition in cloud gaming.

The Competition and Markets Authority said in a statement On Wednesday he was concerned the deal would lead to “less innovation and fewer options for UK players over the coming years”.

The acquisition, which was worth $69 billion when it was announced early last year, will materialize Microsoft (MSFT) “Stronger” in cloud gaming, the regulator added, a market in which it already has a 60%-70% share globally.

Activision’s stock price has fallen More than 11% on Wednesday, while Microsoft stock rose 8%.

Activision Blizzard (ATVI) It is one of the largest video game developers in the world, producing games such as ‘Call of Duty’, ‘World of Warcraft’, ‘Diablo’ and ‘Overwatch’. Microsoft, which sells the Xbox game console, offers a video game subscription service called Xbox Game Pass, as well as a cloud-based video game streaming service.

The business combination deal has been met with growing opposition from antitrust regulators around the world. In December, the US Federal Trade Commission File a lawsuit to prevent the takeover on similar competition concerns. Hearing scheduled for August. The European Union is too Deal evaluation.

Regulators are “cooperating closely”, said Alex Haffner, a partner at London law firm Flaggate, and called the UK’s decision “seismic”, although it only applied to the companies’ activities in Britain.

“It has potential repercussions for these people,” he said [other regulatory] He added, “It is difficult to see how the deal will proceed without the approval of the three regulators.”

The Competition and Markets Authority said in its ruling Microsoft could seek to make Activision’s games exclusive to their own platforms and thus increase the cost of the Game Pass subscription.

“The cloud allows UK gamers to avoid buying expensive game 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 once it begins to grow rapidly would risk undermining necessary innovation.” to develop these opportunities.

“Available evidence … indicates that, in the event of a non-merger, Activision will begin providing games across cloud platforms in the foreseeable future.”

Microsoft, Activision plan to resume

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

“This decision appears to reflect a misunderstanding of the market and the way related cloud technology operates,” added Brad Smith, President of Microsoft.

However, their chances of success in court may be slim. “It’s difficult to win these appeals because you have to prove that it was an inconsequential decision,” said Hafner, the competition attorney. “The standard is very high for success,” he told CNN.

The Enterprises Act 2002 gives the UK’s Competition and Markets Authority wide-ranging powers to block deals it deems harmful to competition.

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

The regulator, which launched an in-depth review of the massive gaming deal in September, said Microsoft’s proposed solutions to its concerns had “significant flaws.”

“Their proposals … would have replaced competition with ineffective regulation in a new, dynamic market,” explained Martin Coleman, chair of the independent panel of experts conducting the investigation.

“Microsoft already has a strong position and edge over other competitors in cloud gaming, and this deal will enhance that advantage, giving it the ability to undercut new and innovative competitors,” Coleman continued. “Cloud gaming needs a competitive, free market to drive innovation and choice.”

The UK cloud gaming market is expected to reach £1 billion ($1.2 billion) by 2026, about 9% of the global market, according to the Competition and Markets Authority.

——Josh Du Lac and Brian Fong contributed reporting.