The UK's Competition and Markets Authority (CMA) is not ready to give up on its opposition to Microsoft's acquisition of Activision Blizzard. The CMA had initially blocked the deal and Microsoft had appealed, expecting a hearing in the summer. However, after Microsoft won a legal battle with the FTC in the US yesterday, both parties agreed to pause the appeal and try to negotiate a solution.
But the CMA also said that Microsoft's offers to address its concerns may trigger a new regulatory investigation. The CMA's media officer Billy Proudlock explained to The Verge that the negotiations are at a very early stage:
“Whilst merging parties don't have the opportunity to put forward new remedies once a final report has been issued, they can choose to restructure a deal, which can lead to a new merger investigation. Microsoft and Activision have indicated that they are considering how the transaction might be modified, and the CMA is prepared to engage with them on this basis. These discussions remain at an early stage and the nature and timing of next steps will be determined in due course. While both parties have requested a pause in Microsoft's appeal to allow these discussions to take place, the CMA decision set out in its final report still stands.”
The CMA has warned, though, that Microsoft will have to do more than just promise to behave well. The regulator had previously wanted Microsoft to sell off part of its console business, but later changed its mind and focused on the cloud gaming issue instead.
According to CNBC, Microsoft and the CMA have reached a tentative agreement on a “small divestiture” that would address the cloud gaming problem. The details of this agreement are not clear, but it may involve Microsoft's Xbox Cloud Gaming services in the UK.
Microsoft Gets US Greenlight to Close the Deal
The EU regulators also had similar concerns about cloud gaming, but they gave the green light to the deal earlier this year after Microsoft offered some concessions. The EU secured a deal that would allow consumers and cloud providers in the EU to stream Activision Blizzard games via any cloud service they want, without paying any extra fees to Microsoft. This would apply to all current and future PC and console games from Activision Blizzard.
A federal judge in San Francisco yesterday rejected the Federal Trade Commission's (FTC) attempt to stop the deal in the United States, saying that the FTC had not shown enough evidence that the deal would harm competition in the video game industry. The judge also said that the deal could benefit consumers by giving them more access to Activision content, such as the popular game Call of Duty.
The FTC had claimed that Microsoft was hiding information from the regulators and that the deal could reduce competition in console switching, multi-game subscription services, and cloud gaming. However, Judge Jacqueline Scott Corley dismissed these arguments and sided with Microsoft.
Microsoft Gaming CEO Phil Spencer and Microsoft president Brad Smith welcomed the court's decision, saying that the evidence proved that the Activision Blizzard deal is good for the industry. Spencer also said that the FTC's claims did not match the realities of the gaming market. Microsoft now has until July 18 to finalize the deal, or else it will have to pay Activision Blizzard a $3 billion termination fee.
Getting the Deal Over the Line Around the World
Closure of the deal largely rested on the FTC case. While the UK is a major market, the CMA is not in a position to block the deal outright. In fact, Microsoft could opt to simply stop offering its cloud gaming services – such as Xbox Game Pass and Xbox Cloud Gaming – in the UK. Brad Smith reacted to the CMA's initial block by saying the country was closed for business.
Microsoft last week took another step closer to being able to complete the merger. The Competition Tribunal of South Africa gave its blessing to the deal, which would make Microsoft the owner of some of the most popular gaming franchises in the world.
The approval from South Africa is not the first one that Microsoft has received for the deal. In fact, many regulators around the world have already said yes to the deal. The European Commission and China's competition regulator, both known for being strict with Big Tech, cleared the deal in May. Japan also approved the deal, despite concerns about how it would affect its own gaming leaders Sony and Nintendo. Other big markets that have approved the acquisition include South Korea and Brazil.
