LONDON — Britain’s top competition regulator on Wednesday moved to block Microsoft’s acquisition of video game publisher Activision Blizzard.The measure marks a major blow for the U.S. tech giant, as it seeks to convince authorities that the deal will benefit competition. Microsoft said it plans to appeal the decision.Shares of Activision Blizzard slumped nearly 10% in U.S. pre-market trading.The U.K. Competition and Markets Authority said it opposed the deal as it raises competition concerns in the nascent cloud gaming market. The CMA previously held concerns about competition in games consoles being undermined but ruled out this concern in a preliminary decision in March.Microsoft could make Activision’s games exclusive to its cloud gaming platform, Xbox Game Pass, cuting off distribution to other key industry players, the CMA said. Cloud gaming is a technology that enables gamers to access games via companies’ remote servers — effectively streaming a game like you would a movie on Netflix. The technology is still in its infancy, but Microsoft is betting big on it becoming a mainstream way of playing games.”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,” the CMA said in a press release Wednesday.Microsoft offered the CMA remedies in an attempt to resolve its concerns — including “requirements governing what games must be offered by Microsoft to what platforms and on what conditions over a ten-year period.” However, the regulator rejected the proposals.”Given the remedy applies only to a defined set of Activision games, which can be streamed only in a defined set of cloud gaming services, provided they are purchased in a defined set of online stores, there are significant risks of disagreement and conflict between Microsoft and cloud gaming service providers, particularly over a ten-year period in a rapidly changing market,” the CMA said.’Flawed understanding of this market’Microsoft Vice Chair and President Brad Smith said in a statement that the company remains “fully committed to this acquisition and will appeal.””The CMA’s decision rejects a pragmatic path to address competition concerns and discourages technology innovation and investment in the United Kingdom,” Smith said Wednesday.”We have already signed contracts to make Activision 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.”Bobby Kotick, CEO of Activision Blizzard, told employees in a letter on Wednesday that the company and Microsoft have “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,” he said. “At a time when the fields of machine learning and artificial intelligence are thriving, we know the U.K. market would benefit from Microsoft’s bench strength in both domains, as well as our ability to put those technologies to use immediately,” Kotick added. “By contrast, if the CMA’s decision holds, it would stifle investment, competition, and job creation throughout the UK …
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