{"id":28062,"date":"2023-04-28T18:34:53","date_gmt":"2023-04-28T18:34:53","guid":{"rendered":"http:\/\/lynettelockhart.com\/client\/explainer-what-next-for-microsofts\/"},"modified":"2023-04-28T18:36:12","modified_gmt":"2023-04-28T18:36:12","slug":"explainer-what-next-for-microsofts","status":"publish","type":"post","link":"http:\/\/lynettelockhart.com\/client\/explainer-what-next-for-microsofts\/","title":{"rendered":"Explainer-What next for Microsoft’s $69 billion Activision deal after UK ban?"},"content":{"rendered":"

By Paul Sandle<\/p>\n

LONDON (Reuters) – Britain’s Competition and Markets Authority (CMA) on Wednesday blocked Microsoft’s $69 billion acquisition of ‘Call of Duty’ maker Activision Blizzard over concerns it would hinder cloud gaming.<\/p>\n

The ruling was a shock after the regulator had already resolved its concerns about the consoles market, a sector dominated by Sony’s PlayStation and Microsoft’s Xbox, which dwarfs cloud gaming. <\/p>\n

IS THE DEAL DEAD?<\/p>\n

Not necessarily. Microsoft said it remained fully committed and would appeal.<\/p>\n

The regulator’s decision reflected a flawed understanding of the market, it said.<\/p>\n

HOW DOES THE APPEAL PROCESS WORK?<\/p>\n

Microsoft can appeal to Britain’s Competition Appeal Tribunal (CAT), an independent judicial body, which will only examine the CMA’s decision-making process, not the merits of the merger.<\/p>\n

Microsoft will not be able to offer new remedies at this stage, such as offering to keep Activision content off its Xbox Game Pass, a subscription service for Xbox users, in Britain, as some analysts suggest.<\/p>\n

“The CAT will not engage with the merits of the CMA’s decision or conduct a wholesale review of the parties’ evidence,” said Edward Lane, senior associate at law firm Harbottle & Lewis, where his particular focus is on creative industries, including film, TV, video games and music.<\/p>\n

WHAT’S NEXT?<\/p>\n

Microsoft must appeal by May 24 and a decision may take many months. <\/p>\n

“The CAT aims to deal with ‘straightforward’ cases in under nine months \u2013 and Microsoft\/Activision is anything but straightforward,” Lane, said.<\/p>\n

WHAT HAPPENS IF MICROSOFT WINS?<\/p>\n

The Tribunal will return the case to the regulator for further review. Microsoft can then offer new concessions.<\/p>\n

“The likelihood is that without a material change in circumstances or new evidence, the CMA is most likely to reach the same conclusion as it did first time around,” said James Groves, a competition associate at European law firm Fieldfisher.<\/p>\n

WHAT ABOUT OTHER REGULATORS?<\/p>\n

European regulators will rule on the world’s biggest gaming deal by May 22. The U.S. Federal Trade Commission filed a complaint to block the deal, which Microsoft has indicated it will fight.<\/p>\n

If either of those blocks the deal, it could be game over, Lane said. <\/p>\n

If the EU goes against it, Microsoft would be fighting an increasingly uphill battle and could decide to cut its losses, even if that would mean paying Activision a hefty $3 billion break fee.<\/p>\n

WHAT HAS HAPPENED TO OTHER CMA APPEALS?<\/p>\n

Facebook-owner Meta appealed a 2021 decision by the CMA to block its acquisition of Giphy, seen as a test case for the British regulator’s resolve to take on “Big Tech”.<\/p>\n

Meta succeeded on a single procedural ground, with the decision otherwise upheld. The CMA considered new submissions, but it came to the same view and Meta had to sell animated images platform Giphy.<\/p>\n

Global financial services company FNZ appealed a block on its 2019 merger with rival GBST. The regulator then “identified certain potential errors” in its investigation chaired by Martin Coleman, who also oversaw the Microsoft-Activision case.<\/p>\n

The CAT sent the case back to be reconsidered, and the CMA agreed to accept a new remedy whereby FNZ could sell GBST and then buy parts of it back.<\/p>\n

\n

(Reporting by Paul Sandle; Editing by Josephine Mason and Tomasz Janowski)<\/p>\n

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