Friday, 12 May 2023 07:52

UK’s CMA Adds Salt to the Wound After Blocking Microsoft Activision Blizzard Deal

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The UK’s CMA (Competition and Markets Authority has added new restrictions on Microsoft and Activision Blizzard after already issuing a formal anti-trust warning over the deal back in January. Now the regulator has added additional orders that prevent either party from “acquiring an interest” in each other without written permission from the CMA.

This new interim order has not been taken well by either company as you can imagine. Microsoft really wants to gobble up Activision Blizzard to add their IP and development talent. It would be a signification boon for them as they are just now realizing that they really cannot win the “console wars” based on hardware alone. They understand that they need to do something drastic to ensure they remain relevant and profitable. Grabbing Activision is something that helps achieve that goal.

The problem for Microsoft is that it makes them a much larger player and puts them in a position to stave other companies out of game content. Regulators in the UK and EU are rightly concerned about this as would Microsoft’s competitors. In the US, the FTC (Federal Trade Commission) issued a complaint in December but has not formally blocked the deal as the CMA has. The MA action is set for hearing on May 22nd, while the FTC’s complaint will be heard in August.

The CMA stated that the new order was issued to prevent pre-emptive action on the part of either Microsoft or Activision Blizzard. It basically is a way to stop the two companies from trying to worm their way around the block until everything is heard. The terms of the new order prevent Microsoft or Activision Blizzard from performing any of the following without prior permission from the CMA:
acquire an interest in the other company or any of its subsidiaries, e.g. investing in each other's development studios.
acquire an interest in another business that holds an interest in the other company.
hold an option to acquire an interest in either of the above.

Between the FTC complaint and the CMA’s stand on the deal it does not look good for Microsoft. That being said, there are some that believe that the European Commission may still approve the deal after Microsoft signed several licensing deals for game content and cloud gaming services. The European Commission is expected to make an announcement on May 15th. The European Commission is not the same as the CMA, so this does not impact that ruling which could still prevent the acquisition from happening. In the meantime, Microsoft’s focus has been on this deal causing them to slip a bit with some of their recent game releases.

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