Microsoft and UK Regulator Given Additional Time to Resolve Concerns Regarding Activision Merger
Microsoft and the UK’s antitrust regulator have been given a temporary halt in their legal dispute, with conditions, as they seek to address concerns raised by the Competition and Markets Authority (CMA) regarding Microsoft’s planned acquisition of Activision Blizzard for $68.7 billion. Judge Marcus Smith of the Competition Appeal Tribunal (CAT), responsible for reviewing the CMA’s decisions, has requested evidence from the watchdog to support their chosen approach, but has nonetheless granted the pause in the legal proceedings.
Smith wants the CMA to justify its adjournment application by providing evidence showing a material change in circumstances or “special reasons” for delaying the trial. According to Reuters, he also wants the regulator to detail any new consultation process it plans to implement “so it’s clear to everyone how it works”. The judge asked the CMA to provide evidence on Thursday.
Microsoft appealed the CMA’s decision in April to block the merger due to cloud gaming. The CAT was scheduled to hear the matter on July 28. However, shortly after the Federal Trade Commission failed to block the acquisition in the US last week, the CMA said it would consider Microsoft’s amended merger agreement. The CMA, Microsoft and Activision all asked the CAT for more time, and the court has granted the request.
The CMA’s lawyer, David Bailey, told the CAT that the FTC’s loss of jurisdiction “was not part of the CMA’s thinking” in its willingness to assess Microsoft’s new proposal. “Based on the discussion to date, both parties – Microsoft and the CMA – are confident that the Microsoft announcing the restructuring will be able to address the concerns identified by the CMA,” he said.
Monday’s hearing revealed that Microsoft has yet to submit an amended proposal to the CMA despite the deadline for the merger being tomorrow, July 18. It seems unlikely that everything will be resolved by then. If not, Microsoft and Activision will either have to agree to extend their current deal (the most likely outcome given how eager they’ve been to get the deal passed) or renegotiate the terms. Otherwise, Activision could walk out of the deal with a $3 billion breakup check from Microsoft in its pocket.
Reports have suggested that Microsoft may sell some cloud gaming rights in the UK to satisfy the CMA’s concerns. Microsoft has signed deals with third-party cloud gaming companies to offer its games on their platforms, which was enough for the European Union to approve the merger.
Meanwhile, the FTC is still scheduled to hold its own hearing on the purchase starting August 2. The agency sued to block the merger and sought a preliminary injunction to prevent Microsoft and Activision Blizzard from closing the deal before it could take the case to trial, but was unsuccessful.
As such, Microsoft and Activision will surely be eager to seal things up by early August. There were suggestions that they would try to close the merger by the original deadline despite the CMA dispute and find a workaround to continue doing business in the UK, but all parties are keen to find an amicable solution, which seems unlikely at this stage. The CMA has given itself an additional six weeks until August 29 to make a final decision on the matter.
