2023-04-28 15:40:01
Britain’s Competition and Markets Authority (CMA) on Wednesday blocked Microsoft’s acquisition of ‘Call of Duty’ maker Activision Blizzard for $69 billion, fearing it might stifle cloud gaming (cloud gaming).
The decision came as a shock, as the regulator had already looked into the console market, a sector dominated by Sony’s PlayStation and Microsoft’s Xbox, which eclipses ‘cloud gaming’. .
IS THE DEAL DEAD?
Not necessarily. Microsoft said it remains fully committed and will appeal.
The regulator’s decision reflects a misunderstanding of the market.
HOW DOES THE APPEAL PROCEDURE WORK?
Microsoft can appeal to the Competition Appeal Tribunal (CAT), an independent judicial body, which will only review the decision-making process of the CMA, not the merits of the merger.
Microsoft won’t be able to come up with new remedies at this stage, such as offering to keep Activision content out of its Xbox Game Pass, a subscription service for Xbox users, in Britain, as some analysts suggest.
“The CAT will not consider the merits of the CMA’s decision or conduct a full review of the evidence provided by the parties,” said Edward Lane, senior partner at law firm Harbottle & Lewis, whose business is focused on the creative industries, including film, television, video games and music.
WHAT IS THE NEXT STEP ?
Microsoft must appeal by May 24 and the decision may take several months.
CAT aims to complete ‘simple’ cases in less than nine months – and Microsoft/Activision is anything but simple,” Lane said.
WHAT IF MICROSOFT WINS?
The court will send the case back to the regulator for further review. Microsoft will then be able to offer new concessions.
According to James Groves, a competition lawyer with European law firm Fieldfisher, “it is very likely that, absent a material change in circumstances or new evidence, the CMA will succeed in the same conclusion as the first time”.
WHAT ABOUT OTHER REGULATORS?
European regulators will vote on the world’s biggest gaming deal by May 22. The U.S. Federal Trade Commission filed a lawsuit to block the deal, and Microsoft said it would oppose it.
If either of those bodies blocks the deal, it might be game over, Mr Lane said.
If the EU objects, Microsoft will face an increasingly uphill battle and may decide to cut its losses, even if it means paying Activision a hefty $3 billion severance package.
WHAT HAPPENED TO THE CMA’S OTHER RECOURSES?
Facebook owner Meta has appealed a 2021 decision by the CMA to block its acquisition of Giphy, seen as a test of the UK regulator’s resolve to tackle “Big Tech”.
Meta was successful on one procedural ground, with the decision otherwise upheld. The CMA considered new submissions, but came to the same conclusion and Meta had to sell the Giphy motion picture platform.
Global financial services firm FNZ has appealed the blocking of its 2019 merger with rival GBST. The regulator then “identified certain potential errors” in its investigation chaired by Martin Coleman, who also supervised the Microsoft-Activision affair.
The CAT sent the case back for reconsideration, and the CMA agreed to a new solution allowing FNZ to sell GBST and then buy back part of it.
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