UK regulator blocks Microsoft’s takeover of Activision

The U.K. has blocked Microsoft’s proposed takeover of video game company Activision.

The Competition and Markets Authority found that the deal would “alter the future of the fast-growing cloud gaming market,” leading to less innovation in the sector.

The CMA said that Microsoft is already responsible for a 70% share of the cloud gaming industry in the U.K. “The deal would reinforce Microsoft’s advantage in the market by giving it control over important gaming content,” the authority wrote in its decision.

Microsoft launched a $69 billion bid to take over Activision last year. The merger, if successful, would be the largest in the sector’s history.

The gaming company is responsible for some of the world’s largest video game titles, including the Call of Duty and World of Warcraft franchises.

“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 statement, Microsoft Vice Chair and President Brad Smith said that the company remains “fully committed” to the acquisition and plans to 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. “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.”

• The CMA decision could hamper other plans by Microsoft to launch its own game-based app store on iPhone and Android devices. In March, the company said it would proceed with the store if its acquisition of Activision was approved, the FT reported.