Daily Management Review

Britain Is About To Approve A New Microsoft-Activision Contract


According to Britain's antitrust regulator, Microsoft's revised $69 billion acquisition of Activision Blizzard "opens the door" to the clearance of the largest gaming merger in history.
Early in 2022, Microsoft announced the merger, but it was halted in April by Britain's competition watchdog over worries that the American computer giant would have too much sway over the nascent cloud gaming industry.
In an effort to regain the trust of the Competition and Markets Authority (CMA), "Call of Duty" creator Activision announced in August that it would sell its streaming rights to Ubisoft Entertainment.
The Ubisoft disposal "substantially addresses prior concerns," according to the CMA's statement on Friday.
"While the CMA has identified limited residual concerns with the new deal, Microsoft has put forward remedies which the CMA has provisionally concluded should address these issues," the regulator said.
Microsoft expressed its "encouragement" about this constructive advancement in the CMA's review procedure.
"We presented solutions that we believe fully address the CMA's remaining concerns related to cloud game streaming, and we will continue to work toward earning approval to close prior to the October 18 deadline," Microsoft President Brad Smith said.
The preliminary approval, according to Activision, which also produces "World of Warcraft," "Overwatch," and "Candy Crush," is excellent news for its future with Microsoft.
Activision's stock increased 1.6%, Microsoft's shares increased 0.3%, and Ubisoft increased 3.6% in Paris premarket trading in the United States.
After accepting Microsoft's promises to licence Activision's games to other platforms—remedies that Britain had rejected—the European Union approved the agreement in May.
Although it too opposes the agreement, the US Federal Trade Commission has been unable to halt it.
The CMA's decision to revisit the case after blocking it was a significant deviation from its usual course of action, but it claimed on Friday that it had acted consistently and that Microsoft has "substantially restructured the deal" to resolve the issues.
"It would have been far better, though, if Microsoft had put forward this restructure during our original investigation," CMA Chief Executive Sarah Cardell said.
"This case illustrates the costs, uncertainty and delay that parties can incur if a credible and effective remedy option exists but is not put on the table at the right time."
Although giving up the cloud gaming rights was not Microsoft's preferred concession, equity analyst Sophie Lund-Yates at Hargreaves Lansdown said it was necessary collateral if the acquisition were to be approved.
This appears to be the last hiccup, she said.
The CMA stated that there were "remaining concerns" with the Ubisoft purchase, but Microsoft has provided solutions to make sure the agency could enforce the conditions of the deal.
Before making a judgement, it is now seeking advice on the available remedies.
"Once the dust settles on what has been a tumultuous investigatory process, there will be important lessons to be learned by all concerned," said Alex Haffner, specialist competition lawyer at UK law firm Fladgate.
"The ongoing spotlight on the way that competition regulators such as the CMA deal with 'Big Tech' will continue to attract significant attention."