Microsoft, Activision-Blizzard and the CMA: So What’s Next? – ignition

In a surprise decision, Britain’s Competition and Markets Authority yesterday took the decision to block Microsoft’s proposed $69 billion acquisition of Activision-Blizzard, citing concerns about Microsoft’s ability to capture the burgeoning cloud gaming Dominate the market with exclusives like Call of Duty.

While the deal has faced challenges in numerous other regions, including the US and EU, many expected the CMA to approve it, especially afterwards statement March that the exclusivity of the Call of Duty console was no longer an issue. With more legal challenges looming around the world and Microsoft set to appeal the CMA’s decision, many are now wondering what’s next for Microsoft and Activision-Blizzard in the UK and abroad.

The answer is, of course, complicated, dependent on multiple regulatory bodies, time-consuming and, most importantly, expensive. We spoke to lawyers and analysts to uncover the rocky road Microsoft faces if it wants to go ahead with Activision-Blizzard, what possible outcomes remain, and why we’ll likely be hearing about this deal for months and possibly years to come.

What happened and why?

After a long examination The CMA has taken action to prevent Microsoft from acquiring Activision-Blizzard, but not for the reason that many expected. While much of the public debate has revolved around the possibility of Call of Duty console exclusivity for Xbox, the CMA noted back in February that this wasn’t actually a serious issue. In the end, what convinced the CMA to fight back wasn’t Call of Duty, it was cloud gaming.

We’ve covered what exactly the CMA’s objections to the takeover are regarding cloud gaming in detail elsewhere, but in summary, the CMA is concerned that if Xbox bought Activision Blizzard, it could dominate the cloud gaming market by making games like Call of Duty and World of Warcraft exclusive to its own cloud gaming platforms rather than console exclusives offers . With these content powerhouses under its belt, the CMA says, Microsoft could effectively control elements of the market like subscription pricing and structure without significant resistance from other services that lacked these massive games. It doesn’t help that the CMA already sees Microsoft as a dominant position in nascent cloud gaming due to its ownership of the Windows operating system, significant cloud infrastructure, and already robust content library.

If this all sounds like a pretty big deal, it is: Microsoft’s plans to pay $69 billion for Activision Blizzard will require approval from regulators in various regions, including the UK, to succeed US and the EU . While some countries have already pledged, decisions are still pending from both the US and EU, meaning the UK’s rejection could be just one of others. And while Microsoft claims it will catch on, the longer it goes on, the more expensive and obnoxious it will be for the company to pull through.

What’s next?

As Alex Haffner, a competition partner at London law firm Fladgate, explained to me, Microsoft has effectively four weeks to submit an appeal document to the UK Competition Appeal Tribunal (CAT), which will then assess whether the CMA “did or did not act within its limits.” due diligence in making the final decision.”

“In general, this is a high hurdle for complainants, and successful appeals of CMA decisions blocking mergers have been rare, though not unprecedented,” Haffner said. “All in all, the appointment process can be expected to last three to four months. If the CAT grants an appeal, the most likely outcome would be a remittance of the case to the CMA to reassess its decision based on the criticisms upheld by the CAT.”

There are certainly criticisms of the CMA’s final decision. Gamma Law’s David B. Hoppe pointed out that the CMA’s definition of “cloud gaming” as a distinct market segment was a difficult argument, adding that the CMA “kind of picked a few things to support the position that which Microsoft already occupies dominant player in cloud gaming.”

Microsoft Acquires Activision Blizzard: The Story So Far

NVIDIA And other cloud gaming companies who have benefited from these promises are rallying in favor of Microsoft, it may mean nothing in the end.

What about the FTC?

Unlikely as it looks to Microsoft, let’s say it manages to convince both the CAT and the CMA. Even then, it still faces challenges in the EU and US, which we expect to hear more about in May and August, respectively. Haffner noted that the CMA’s decision sets “an important precedent” for both the EU Commission and the US Federal Trade Commission as their deliberations continue.

Sam Castree of Sam Castree Law explained that while the UK ruling has virtually no impact on the US’s own separate decision, it could push the US in a slightly different direction. Up to this stage The FTC’s arguments focused on two areas: Concerns that Microsoft is holding back games from other platforms, and concerns that Microsoft will create a monopoly in a narrow definition of a “relevant market” – like “high-performance consoles” or, yes, “cloud gaming”. After the CMA dropped its concerns about Call of Duty exclusivity and focused on cloud gaming, the FTC may be motivated to change tactics to align with the CMA.

It would put the FTC in an awkward position arguing that the CMA was right about harming cloud games and wrong about harming consoles.

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“The FTC could drop some of the allegations in the original complaint and focus on a narrower set of concerns, like the cloud gaming market,” Castree said. “They could easily adopt some or all of the CMA’s findings to support their own arguments and tailor the fight to areas they feel are strongest. The other possibility is that they accept the CMA’s findings on cloud gaming, but still maintain the entire original complaint.”

However, Castree noted that this second possibility seems unlikely given that the only major competitor currently claiming to be hurting the console market is Sony. “Also, it would put the FTC in an awkward position to argue that the CMA was right and wise and good about hurting cloud games and wrong and stupid and bad about hurting consoles,” he added added.

All of this leaves Microsoft with a rather expensive decision to make. The legal fees for all of these fights add up quickly, but even if Microsoft backed out now, there would be serious financial consequences. As a part of the merger agreementMicrosoft agreed to pay Activision Blizzard a whopping $3 billion if the deal fell through after April 18, 2023. At some point, the tech giant will have to decide whether it’s worth pumping endless amounts of money into lawyers in multiple countries over months or even years of it, or if it should swallow its pride and $3 billion to avoid a protracted legal battle.

With all of this combined, it looks like Microsoft’s chances of landing the most expensive deal in gaming are getting slimmer. For all of Microsoft’s confidence in the preparation and all of Sony’s bluster around Call of Duty, it’s a little surprising to see Cloud gaming of all things take the wind out of the sails of this deal. But the fight isn’t over yet – maybe Microsoft, Activision Blizzard or Cloud Gaming will surprise us again.

Rebekah Valentine is a news reporter for IGN. You can find her on Twitter @duckvalentine.