A week ago, Microsoft said it would appeal against regulators in the UK who blocked the company's planned Activision Blizzard merger. It seems both the Competition and Markey Authority (CMA) and Microsoft was a quick resolution, and the appeal is likely to be heard in July. Microsoft is having more success in other regions, with South Korea the latest to greenlight the $69bn merger.
The CMA had rejected Microsoft's plan to buy Activision Blizzard in late April, saying that it would harm competition and innovation in the emerging cloud gaming market in the UK. The CMA argued that Microsoft would have an unfair advantage over its rivals by owning Activision Blizzard's popular games, which could be used to attract and retain customers to its Xbox Game Pass subscription service and its xCloud streaming platform.
Microsoft had disputed the CMA's findings, saying that it had offered several remedies to address the regulator's concerns, such as licensing Activision Blizzard's games to other cloud gaming providers and maintaining fair and reasonable terms for access to its platforms. Microsoft also claimed that the CMA had underestimated the size and diversity of the cloud gaming market, which includes competitors such as Amazon, Google, Sony and Nvidia.
Microsoft's appeal will be heard by the Competition Appeal Tribunal (CAT), which is an independent judicial body that hears and decides cases involving competition law and economic regulation. The CAT has set a tentative date for the hearing on July 24, 2023, after a case management conference that took place online on May 30. The hearing is expected to last for six days, during which both Microsoft and the CMA will present their oral arguments and evidence.
Getting the Deal Over the Line
The CAT will then issue a judgment on whether to uphold or overturn the CMA's decision. The CAT can also refer the case back to the CMA for further consideration or order a new investigation. The CAT's judgment can be appealed to the Court of Appeal on points of law.
Microsoft's acquisition of Activision Blizzard is the largest deal in the history of the gaming industry. However, the deal still faces scrutiny from other regulators, such as the US Federal Trade Commission.
Microsoft hopes to complete the deal by mid-2024, subject to regulatory approvals and other closing conditions. Microsoft has said that it plans to keep Activision Blizzard as a separate business unit within its gaming division, and that it will respect its creative independence and existing partnerships with other platforms.
Other regulators around the world have already approved the merger. The European Commission (EC) accepted Microsoft's concessions to offer free licenses over a 10-year period allowing European consumers who purchase Activision PC and console games to stream them on other cloud gaming services.
The acquisition has been given a green light in the European Union, Japan, and China. This week, the South Korean regulatory body known as the Korea Fair Trade Commission (KFTC) also approved the deal.In its decision (via VGC), the KFTC noted that Activision Blizzard's games are not as popular in South Korea compared to other parts of the world. The KFTC also noted that Microsoft has a history of competing fairly with other companies in the gaming industry:
“The KFTC found that the acquisition would not substantially lessen competition in the relevant market, as Activision Blizzard's market share in South Korea is relatively small.”
The FTC is Holding Out and May Decide Everything
The deal also faces significant hurdles in the US, where the Federal Trade Commission (FTC) filed a lawsuit in December to block the deal on antitrust grounds. The FTC argued that the deal would eliminate a major rival to Microsoft in the gaming industry and reduce innovation and consumer choice. A trial has been set for later this year.
The acquisition of Activision Blizzard would be Microsoft's largest-ever deal and would make it the world's second-largest game maker behind Nintendo. Activision Blizzard has more than 400 million monthly active players across its franchises, which also include Call of Duty, Candy Crush, Hearthstone, World of Warcraft, and Overwatch.
There have been suggestions Microsoft would simply avoid the UK if the appeal is not successful, essentially making Activision games not available in the country. While that may be a possibility in the UK, Microsoft would not be able to take such a position in the US. So, the company's legal battle with the FTC is pivotal in deciding if the Activision Blizzard deal goes ahead.
You can keep track of all aspects of this deal, past, present, and future by checking out our Microsoft Activision Blizzard merger timeline stories. Alternatively, check out Microsoft's official hub.
Last Updated on June 4, 2023 1:09 pm CEST by Markus Kasanmascheff
