UK Regulator Blocked Microsoft’s $69 Billion Acquisition of Activision Blizzard

U.K. regulators blocked Microsoft’s (MSFT) $69 billion acquisition of Activision Blizzard (ATVI) on Wednesday, hobbling the tech giant’s ambitions in the fast-growing European gaming market and handing a victory to proponents of stricter regulation of big tech companies.

The decision by the U.K.’s Competition and Markets Authority (CMA) halted what could have been the biggest consumer tech acquisition since AOL bought Time Warner over two decades ago. Prior to the deal, Microsoft already held a dominant 60 to 70% share of the global cloud gaming market from owning Xbox, its flagship Windows operating system, and its Azure cloud computing infrastructure.

The U.K. cloud gaming market is among the world’s fastest growing, with monthly active users more than tripling from the start of 2021 through the end of 2022. The U.K. market is projected to be worth 1 billion GBP ($1.25 billion) by 2026, accounting for 9% of the 11 billion GBP ($13.7 billion) global cloud gaming market.

U.K. regulators said the acquisition would stifle innovation and lead to less consumer choice.

"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 in a statement.

Microsoft's Brad Smith, vice chair and president, issued a statement saying, “We remain fully committed to this acquisition and will appeal.”

The deal, first announced in January 2022, also hit regulatory roadblocks in the U.S. The Federal Trade Commission (FTC), led by Chair Lina Khan, who has made challenging acquisitions by big tech companies a cornerstone of her tenure, filed a lawsuit against Microsoft in December to thwart the deal. In response, Microsoft attempted to bypass the FTC by appealing to British and European authorities, who eventually sided with the FTC.

The ruling provides a major victory for proponents of stricter enforcement of antitrust laws and regulation of big tech companies that have become near-monopolies in certain industries, a trend that has gained momentum in the United States and abroad.

The FTC sued Amazon (AMZN) in February after scrutinizing the bundling practices of the ecommerce giant’s Prime subscription service and alleged bias against outside sellers on its website. In 2020, the Justice Department sued Google (GOOG) for violating antitrust law in the search and search advertising market, alleging that its business practices constituted a monopoly.

Microsoft shares rose more than 7% in early trading Wednesday, while those of Activision Blizzard tumbled 11%, erasing their year-to-date gains. Shares of the former are up 23% so far this year.